By Greg Gao

(JW Insights) June 1 -- German auto giant Volkswagen’s wholly-owned company will set up a €1 billion innovation center in Hefei, eastern China’s Anhui Province, the company announced on May 30.

Volkswagen Group (China) and Hefei's Economic and Technological Development Area government jointly signed an agreement, announcing the establishment of the project.

Volkswagen Group (China) will establish a new wholly-owned technology company integrating vehicle development, component research, and procurement functions. It will become Volkswagen Group’s largest technology and innovation center in China. The company is expected to commence operations in the first quarter of 2024, with about 3,000 employees, according to the local government.

Volkswagen Group (China) will participate in early-stage research and development through the subsidiary, aiming to enhance its technology and research capabilities in China. It will establish a centralized procurement system covering local suppliers in China while maintaining close connections with its European headquarters. This ensures that Volkswagen Group can promptly access China’s latest local technologies and applications, closely cater to Chinese consumers and market trends, and achieve faster research and shorter development cycles, said the company.

On May 28, during the “Investing in Anhui” series of activities, Volkswagen Group (China)’s Chief Financial Officer announced that Volkswagen would continue to invest in Hefei, with a total planned amount of RMB23.1 billion($3.25 billion). The fixed asset investment for the production base (Phase I) and research center is RMB14.1 billion($1.98 billion), while the R&D spending before the new model launch is approximately RMB9.05 billion($1.27 billion).