Volkswagen says it can now make cars entirely in China

Frankfurt, Germany: Volkswagen can now develop cars from start to finish in China, the German automotive giant said Tuesday, as it plots a fightback in the world's largest market.

The company's new test laboratories in the Chinese city of Hefei meant Chinese customers could now buy VW vehicles made entirely in the country, Volkswagen said -- the first time in company history that new vehicles could be fully developed outside of Germany.

The new research centre in Hefei is Volkswagen's only one dedicated exclusively to electric cars, the firm said, and it would also play a role in exports from China to South East Asia and the Middle East.

"We are taking our development capabilities in China for China to the next level," Volkswagen China boss Ralf Brandstaetter said.

"We are strengthening our ability to respond quickly to local needs and to shape technologies directly where they will be used."

German carmakers have come under intense pressure from local competitors in China in recent years, with worldwide sales and profits suffering amid their slump in China.

Chinese carmakers last year held almost a 60 percent share of their domestic market, according to consultancy Jato Dynamics, up from 35 percent in 2019, and German rivals have responded by moving work over to China in a bid to learn from locals and better cater for Chinese customers.

Speaking at the Munich car show in September, Volkswagen CEO Oliver Blume told reporters that producing a majority of cars in Germany before exporting them all over the world "doesn't work anymore".

"Therefore we decided with a clear China strategy, in China for China," he said. "This is our new strategy."

Some aspects of model development can be done in China at half the cost of what it would take in Europe, Volkswagen said, and the new facilities in Hefei meant vehicle development times could be cut by up to 30 percent compared to Volkswagen's current Chinese development cycle.