VW needs to cut costs: Chinese technology in Europe soon?
Volkswagen Group could save up to five billion euros by adopting the CEA electronics architecture, developed in China, in its European volume models. However, a software partnership with Rivian is planned for models outside China, which has sparked discussion among the board members.
The CEA electronics have already proven reliable in China and are also used in the VW ID. Era 9X, developed for the Chinese market.
Image: VW
The VW Group’s Core brand portfolio, including VW, Skoda, and Cupra, must improve its profitability by roughly 12 billion euros by 2030 and reduce planned investments by almost 15 billion euros. Against this backdrop, brand chief Thomas Schäfer and China operations head Ralf Brandstätter propose using the CEA electronics architecture developed for the Chinese market in future European vehicles such as the ID.Golf, ID.Passat, or Skoda Enyaq. Manager Magazin reported these plans based on insider information. Specifically, they relate to the mid-size segments on the new SSP platform, above the compact car class. It is estimated that these will account for three-quarters of all future electric vehicles in the group.
Chinese technology is cheaper than Rivian’s architecture
The CEA architecture was developed at China’s VCTC (Volkswagen China Technology Company) development center in Hefei in collaboration with Xpeng. Schäfer now has another advocate in VCTC’s CEO, Thomas Ulbrich, who spearheaded the partnership with Xpeng and brought the CEA system to production readiness for the VW group. The system is already in successful use in China’s ID. Aura and ID. Era models, while European software platforms at Audi and Porsche have repeatedly caused delays.
The architecture planned by Rivian for future models is also much more expensive than the solution from China. According to Manager Magazin, an hour of development work at Rivian’s California joint venture RVT costs around 174 euros, compared to about 60 euros in China. For comparison, the hourly rate in Germany is 120 euros. An electric car like the upcoming new Tiguan would be roughly 8,000 euros more expensive under European development using Rivian’s software than if developed in China. Switching volume models to the CEA architecture is expected to result in savings of four to five billion euros.
Competition is already putting pressure on speed. Opel CEO Florian Hüttl has announced a fully electric C-segment SUV for 2028, based on the Leapmotor B10 electric platform. Within the VW Group, there are concerns that after this first Opel project, Stellantis will gradually switch all of its volume brands to the cheaper Leapmotor technology.
High costs loom if there is a change
There is opposition within the board to Schäfer’s plan. Audi CEO Gernot Döllner helped establish the Rivian alliance and relies on U.S.-based software outside of China. If the mass-market brands switch to Chinese technology, the Rivian project will lose out on high production volumes. This could drive up the fixed costs per vehicle for remaining brands such as Audi or Porsche. According to Schäfer’s strategists, the core brand group will still save three billion euros net even if it has to continue financing the Rivian joint venture.
Another obstacle is adapting Chinese software to European cybersecurity and certification standards, as this requires additional development work and incurs costs. Moreover, Chinese software struggles to gain acceptance in the U.S. even for political reasons alone. Furthermore, if development efforts are systematically shifted to Hefei, jobs in European software development are likely to face even greater pressure.
The final decision rests with the board of directors of Volkswagen AG, led by CEO Oliver Blume. Finance chief Arno Antlitz is considered the decisive factor, as his opinion carries significant weight given the stringent cost-cutting requirements.