November 6, 2025 — Volkswagen AG (VW) has announced plans to develop its first in-house artificial intelligence chip in China, as part of a broad effort to strengthen its position in the world’s largest and most competitive electric-vehicle (EV) market.
The project will be carried out through CARIAD SE, VW’s software subsidiary, in collaboration with Horizon Robotics, one of China’s leading automotive AI chip developers. The new system-on-chip (SoC) is being designed to power advanced driver-assistance and smart-driving features in future Volkswagen models built for the Chinese market.
According to VW executives, the chip will deliver computing power in the range of 500 to 700 tera-operations per second (TOPS) — sufficient to process real-time data from cameras, sensors, and radar systems for automated-driving capabilities.
“Developing core technologies locally in China is a key part of our ‘In China, for China’ strategy,” said a Volkswagen spokesperson. “This AI chip is a milestone toward greater technological independence and a faster response to the needs of Chinese consumers.”
The development program is expected to take three to five years, with an estimated budget exceeding US $200 million, according to industry reports.
Volkswagen has long relied on the Chinese market as its largest source of vehicle sales, but in recent years has seen its market share eroded by domestic EV leaders such as BYD, Nio, and Xpeng. Local brands now account for roughly 70 percent of China’s electric-vehicle market.
By localizing chip development and integrating advanced driving intelligence directly into its vehicles, VW aims to accelerate innovation cycles and reduce dependency on foreign semiconductor suppliers — a strategic response to global chip-supply challenges and the growing importance of software-defined vehicles.
The move underscores a broader trend of global automakers investing heavily in semiconductor R&D to gain more control over the technologies powering next-generation vehicles.
Analysts see VW’s effort as part of an ongoing shift toward vertical integration, where traditional carmakers seek to own key components such as batteries, software platforms, and AI processors.
If successful, Volkswagen’s new AI chip could form the basis of a locally manufactured smart-driving stack and position the company to regain relevance among China’s tech-savvy EV buyers.
