Lower Saxony’s blunt proposal puts Volkswagen’s problem in plain sight: the German giant may now need China-developed cars to keep German factories busy.
Volkswagen built its global power by sending German engineering out to the world. Now one of its most powerful shareholders is asking whether the flow needs to run the other way.
Olaf Lies, the premier of Lower Saxony and a member of Volkswagen’s supervisory board, told Deutsche Presse-Agentur in comments carried by WELT on June 27 that VW should consider producing group vehicles developed with Chinese partners in German plants. His point was not subtle. If VW already has models built in China with partners such as XPeng and SAIC, he argued, Germany should be fighting to bring some of that production into its own factories rather than watching new capacity rise elsewhere.
You should read that as more than a local politician defending jobs. Lower Saxony holds 20% of Volkswagen voting rights, and under VW’s governance structure the state has real blocking power on major decisions. Lies also sits on the supervisory board alongside deputy premier Julia Willie Hamburg. When he says plant closures are the wrong answer, he is not shouting from the sidewalk. He is speaking from inside the machine.
The timing makes the message sharper. The Guardian reported on June 26, citing German media, that Volkswagen is considering cuts of up to 100,000 jobs and eventual production stops at some plants, potentially doubling reductions already announced. VW has not confirmed those figures, and a company spokesperson said it would not pre-empt the process. But the company did acknowledge the bigger fact: its old model of developing cars in Germany, producing them in Europe and exporting them worldwide no longer works across all brands.
That is the sentence every Western incumbent should sit with.
For years, China was the prize. It was the market where Volkswagen sold millions of cars through joint ventures with SAIC and FAW, and the place where scale covered a lot of strategic drift. WELT’s DPA report noted that VW has been active in China for 42 years and, in strong years, built around three million vehicles there.
Now China is also the place where VW is trying to repair its product speed. Volkswagen agreed in 2023 to invest about $700 million in XPeng for a stake of just under 5%, and the two companies have been working on VW-brand electric models for China. In 2024, VW and XPeng expanded that into platform and software cooperation, with plans for a China-specific electrical and electronic architecture due for production from 2026. XPeng has also said the partnership can shorten development cycles by more than 30%.
That last figure matters. German carmakers did not lose ground in China because buyers suddenly forgot what a Golf or a Passat meant. They lost ground because Chinese EV makers made the car feel like a fast-moving software product while European groups were still arguing through committees. Screens, driver-assistance systems, charging speeds, voice controls, over-the-air updates, cabin software: these are no longer side features. They are the car.
Frankly, VW’s problem is not that China is cheap. It is that China is fast.
You can see it in the competitive pressure around the company. The Wall Street Journal reported this week that Chinese brands recently passed 10% of Europe’s car market share, with BYD, Chery and Leapmotor pushing into territory long treated as safe ground for Volkswagen, Stellantis and Renault. The Guardian also reported that VW’s Chinese joint ventures with FAW and SAIC held 13.9% of China’s passenger vehicle market by sales in the first two months of 2026, just ahead of Geely’s 13.8%, based on China Passenger Car Association data. That is not dominance. That is a fight by decimal points.
The factory fight is really a speed fight
Lies is trying to turn that fight into a manufacturing answer. His argument, according to DPA, is that VW does not currently have enough vehicles in the market to load all its plants properly. If China-developed group models can fill German capacity, then German workers get production, VW gets a broader product line, and Europe gets some of the innovation that would otherwise stay in Hefei, Shanghai or other Chinese development hubs.
There is a hard catch. A car designed around Chinese supply chains, software stacks and buyer habits does not become a German plant solution just because a shareholder wants it. European safety rules, supplier contracts, labor costs, tariffs, battery sourcing and brand positioning all get in the way. Building a China-developed VW in Germany may protect jobs only if the economics still work after those layers are added.
Still, dismissing the idea would be lazy. Nissan has been looking at using its Sunderland plant for cars tied to China’s Chery, according to recent Guardian reporting. XPeng is already assembling European-market vehicles through Magna Steyr in Austria, and its vice-chair Brian Gu told the Guardian this month that he did not expect a China-style EV price war in Europe. Chinese automakers are not just exporting cars now. They are studying where to build, how to localize and how to make Europe profitable.
Volkswagen has a choice. It can treat Chinese technology as something to defend against, or it can admit that some of the best answers to its German factory problem may come from the market that exposed the problem first.
That is uncomfortable, but it is not humiliation. It is what global competition looks like when the center of learning moves. For founders and operators, the useful lesson is simple: your legacy only buys you time if you use that time to learn faster than the challenger. VW still has brands, plants, unions, capital and political protection. It also has a shareholder telling it, in public, that the next useful Volkswagen for Germany might be a Volkswagen shaped in China.
The next supervisory-board fight will decide whether that remains a suggestion or becomes part of the restructuring plan. Either way, the old map has already changed.
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