German firms double down in Hefei's NEV cluster

HEFEI — German enterprises are doubling down on their investment in China's fast-growing new energy vehicle industry to tap the market potential of the country's 1.4 billion people.

China has seen a significant increase in the production and sales of NEVs this year. During the first seven months, China's NEV output was 4.59 million units, up 40 percent year-on-year, while sales reached 4.53 million units, rising 41.7 percent from a year ago, said the China Association of Automobile Manufacturers.

Hefei, capital of East China's Anhui province, is home to a number of NEV enterprises, such as Volkswagen Anhui, Nio, and BYD, gathering more than 500 industrial chain enterprises and employing about 100,000 people.

From January to May this year, the cumulative output of NEVs in the city reached 230,000, or one unit per minute on average. Hefei is accelerating to build itself as an important NEV industrial cluster in China and the world.

"Volkswagen Anhui is Volkswagen Group's first majority-owned joint venture for all-electric vehicles in China. It is a key pillar for the group's e-mobility push and decarbonization strategy in China and globally," said Erwin Gabardi, CEO of Volkswagen Anhui.

With a planned investment of 23.1 billion yuan ($3.17 billion), the German carmaker is going full speed ahead in building a new NEV hub along with a complete value chain, covering research and development, manufacturing, sales and services in Hefei.

"The government is very innovative and has given us a lot of preferential policies to promote the rapid progress of the project, and to support our recruitment with attractive talent policies," Gabardi told Xinhua News Agency.

The company is cooperating with Hefei University and the local government to cultivate highly skilled NEV professionals. Established in 2021, Volkswagen College aims to bring a German dual-education framework into Chinese vocational institutions and higher education to cultivate NEV talents for the industry's long-term growth. The first batch of "seed engineer" students from the program have graduated and joined Volkswagen Anhui, contributing to NEV R&D.

Volkswagen Group also reached an agreement to buy a 4.99 percent stake in Chinese NEV startup Xpeng in July for $700 million and will co-develop two NEV models for the Chinese market.

Recently, Christian Koetz, head of the Tires Group Sector and member of the Executive Board of Continental AG, paid a visit to Hefei to discuss further cooperation one month after Hefei officials went to the company's headquarters in Hannover, Germany.

The two parties agreed to seize the development opportunities of the NEV industry, speed up the construction of the fourth phase of the company's tire factory in Hefei to expand production and plan followup projects such as auto electronics and R&D centers. Since its official operations began in Hefei in 2011, the company has achieved an annual output of 12 million passenger car tires and 3 million bicycle tires, with an output value of 6.34 billion yuan in 2022.

Volkswagen and Continental are among an increasing number of German enterprises that have shown interest in investing in Anhui. On Aug 18, the China-Germany Friendship Association organized well-known companies, including Volkswagen, BMW and Mercedes-Benz, to visit Anhui to discuss cooperation.

The association will give full play to the matchmaking role to further promote cooperation between German enterprises and Anhui in NEVs, vocational education, youth exchanges and other aspects, said Shi Mingde, president of the China-Germany Friendship Association.

Being a world-renowned manufacturer of automobiles, Germany has a lot to gain and share when cooperating with China in terms of market access, technology innovation and talent cultivation.

China has been Germany's largest trading partner for seven years. There are over 5,000 German companies active in China and over 2,500 Chinese companies active in Germany, according to Silke Besser, general manager of the German-Chinese Business Association.

Xinhua