Automotive News Europe — 2026-07-13
Automotive Industry
Volkswagen Group is weighing a strategic reversal: building vehicles designed for China at underused German factories, a move that could preserve jobs but upends the automaker’s regional product strategy.
The idea, which CEO Oliver Blume first publicly raised during VW’s first-quarter earnings call on April 30, has gained momentum as the company’s supervisory board reviews sweeping cost cuts. With plants in Emden and Zwickau facing excess capacity, China-developed models have emerged as an option to fill production lines.
Three broad scenarios are under discussion, according to people familiar with the matter.
VW could build Xpeng models
One option would see VW manufacture vehicles for Chinese partner Xpeng in Germany. VW acquired a 5 percent stake in Xpeng in 2023 to gain access to its software architecture and artificial intelligence capabilities, and the companies have since jointly developed models for China.
Sign up for the Automotive News Europe Segment Analysis newsletter, a monthly in-depth look at a segment of the car market, including sales and market share data
Xpeng exports the G6, G9 and P7+ to Europe, shipping them from China as completely knocked-down kits for final assembly by Magna Steyr in Austria.
Assembling those vehicles at VW plants could improve capacity utilization, but executives have largely dismissed the idea because they see no strategic value in Europe’s largest automaker acting as a contract manufacturer for a fast-growing Chinese EV company.
VW ID Era 9X could replace Touareg in Europe
A second, more viable scenario would involve producing VW models originally developed for China.
The company has accelerated local product development through joint ventures with SAIC Motor and FAW Group as it attempts to regain competitiveness in the world’s largest auto market. Among the vehicles emerging from those partnerships is the ID Era 9X, VW’s first range-extended electric SUV for China.
The six-seat SUV, which was developed by VW and SAIC, has emerged as one of VW’s stronger-performing electrified models in China, with sales of almost 5,000 in May, according to MarkLines.
Executives believe the ID Era 9X could complement VW’s European lineup. It could fill the gap left by the Touareg, whose production ended this year with no successor expected before 2029, if at all.
The model would require extensive engineering changes to comply with European regulations. SAIC would also need to approve overseas production, while converting a German factory for the vehicle would require substantial investment.
VW’s China Scalable Platform could be used in Europe
The third, internally preferred option would be to build future vehicles based on VW’s China Scalable Platform (CSP).
The platform will underpin China models starting in 2028. Current collaborations with Xpeng, SAIC and FAW are viewed as a bridge until CSP arrives.
Extending the platform to Europe would represent a strategic reversal. VW had planned for future models in Europe and North America to rely on software developed with Rivian Automotive, while China-specific products were intended to remain exclusive to that market.
The proposal has also exposed tensions between management and VW’s powerful labor representatives. The works council argues that adapting China vehicles for Europe should be handled by VW’s Wolfsburg engineering teams, while some executives favor using the company’s Hefei development hub.
VW has not made any decisions and continues to evaluate all options, according to sources.
‘Made in Europe’
The deliberations also come as the European Union considers potential “Made in Europe” requirements for electric vehicles. Executives believe supply chains for China-developed models could be localized if necessary, potentially easing the EU’s concerns about Chinese imports while allowing production to shift to Germany.