Volkswagen’s $3.5 Billion Bet in China: Can It Overcome Local Competitors and Restore U.S.-Allied Supply Chain Strength?

Volkswagen is gambling billions on reclaiming lost ground in the world’s largest and most aggressive auto market — China. Once commanding over half of that space, the German automaker has witnessed its dominance erode amid surging local rivals like BYD and Geely, which leverage rapid innovation cycles and deep local knowledge to undercut foreign brands. In a bold pivot, Volkswagen invested 3 billion euros ($3.5 billion) into its largest R&D center outside Germany — located in Hefei, central China — aiming to create vehicles tailored exclusively for Chinese consumers. This marks a sharp break from the old model where foreign...