Volkswagen says it can build an electric car entirely in China at roughly half the cost of producing one in Germany, helped by quicker development, lower labor expenses, easier battery sourcing, and a more efficient supply chain, according to FT.

After heavy investment in its new R&D base in Hefei, which includes more than 100 labs for software, hardware, and powertrain testing, the company says it can now validate software, hardware, and full vehicles at the same time.

According to Volkswagen’s China technology chief Thomas Ulbrich, the facility gives engineering teams “an entirely new level of integration,” allowing them to shorten decision cycles and speed up innovation. Volkswagen says the development timeline for new Chinese EVs is about 30% shorter than the traditional 50-month process.

FT writes that the carmaker intends to introduce around 30 EV models in China over the next five years as it tries to regain momentum in the world’s largest auto market, where competition from domestic EV makers has eroded its earlier dominance. Although the strategy began as “in China, for China,” executives say the company is now considering exporting Chinese-built models and applying Chinese-led advances to its global operations.

Other European manufacturers, such as Renault, are also trying to match China’s rapid development pace by simplifying components and relying more on local engineering talent.

Still, Volkswagen stands out for the scale of its investment, committing almost EUR4 billion in China since 2022 through efforts including its partnership with Xpeng and its funding of Horizon Robotics, with which it is developing an AI chip for autonomous-driving features.

These moves come as Volkswagen continues to cut costs in Germany, where high production expenses and weak European demand have led to a plan to reduce its domestic workforce by 35,000 by 2030.

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