Volkswagen Develops China-Exclusive Chip for Smart Vehicles

Volkswagen is making a bold push to reclaim its position in China’s competitive auto market by developing its first in-house chip for smart driving technology. The German automaker announced on Wednesday that CARIZON, its joint venture with China’s Horizon Robotics, will design a high-performance chip capable of processing 500–700 tera operations per second (TOPS). This will allow next-generation Volkswagen cars to efficiently handle data from multiple cameras and sensors, a key requirement for advanced driver assistance and autonomous driving features.

The new chip is part of Volkswagen’s strategy to strengthen research and development specifically for China. While the company did not clarify whether the chip would be used in vehicles sold outside China or how production would be handled, it expects the chip to be ready for deployment within three to five years. This timeline indicates Volkswagen’s commitment to catching up with the rapid pace of technology development seen among local competitors.

Volkswagen’s efforts come as it faces declining sales in its largest market. Annual sales in China fell to 2.75 million units in 2024, down from a peak of over 4 million in 2018. The company also lost its position as China’s top-selling car brand to BYD in 2023. BYD’s rise has been fueled by a strong focus on affordable electric and plug-in hybrid vehicles, which have resonated with cost-conscious and environmentally aware consumers.

To counter these challenges, Volkswagen has expanded partnerships with Chinese companies. One example is its collaboration with Xpeng to co-develop vehicle electronics architecture for multiple models, aiming to improve product competitiveness and better integrate smart features into its cars. By investing in China-made chips and advanced electronics, Volkswagen is signaling a strategic shift toward localized innovation, tailoring its technology to meet the specific demands of Chinese consumers.

Industry observers suggest that this move could help Volkswagen regain market share if the company can successfully combine high-performance chip technology with competitive pricing and appealing vehicle designs. The focus on in-house chip development also reflects a broader trend among automakers globally, as they seek greater control over critical components for smart and electric vehicles.

Volkswagen’s chip initiative is not just a technological upgrade; it is a clear statement of intent. With China’s auto market evolving faster than ever, the automaker is betting that high-tech, locally developed solutions will be key to winning back consumers and restoring its competitive edge.