In a recent shake-up, Volkswagen moved its BEV R&D resources in China to Anhui province, where it hopes to build a "Wolfsburg of the East," according to local media.

German automotive giant Volkswagen is reportedly consolidating its R&D resources for electric vehicles (EVs) in China, hoping to make Anhui its second global R&D center.

In a recent restructuring, Volkswagen has centralized its battery electric vehicle (BEV) R&D in China to Volkswagen (China) Technology Co Ltd (VCTC) in east China's Anhui province, according to a report in local media outlet 36kr today.

A large number of Volkswagen employees will be transferred to VCTC in Anhui, or redeployed to other operations, while the Beijing R&D center retains some hybrid project development, according to the report.

New models developed at the VCTC will be produced and sold by Volkswagen's three joint ventures in China -- Volkswagen Anhui, SAIC Volkswagen, and FAW-Volkswagen, according to the report.

The move means that Volkswagen, headquartered in Wolfsburg, Germany, has relocated its R&D 7,000 kilometers eastward, and the VCTC will become Wolfsburg of the East, the report said, citing an insider.

VCTC currently employs around 2,000 people and aims to reach 3,000 in 2024, according to the report.

The move is seen as an important sign that Volkswagen's EV business in China is picking up speed, 36kr said.

Future Volkswagen BEVs in China will be built on two pure electric platforms -- MEB (Modular Electric Drive Matrix) and CMP (China Main Platform), the report noted.

Models built on the MEB platform will go on sale globally, and the VCTC will be responsible for adapting new vehicles on the platform in China. The CMP, on the other hand, is a dedicated platform developed by Volkswagen for the Chinese market, and the VCTC will lead the research and development of new vehicles on the platform, according to 36kr.

Both platforms will use the CEA electrical and electronic architecture developed by VCTC, Cariad and Xpeng (NYSE: XPEV), the report said.

Before VCTC was established, Volkswagen's BEVs were designed and developed by its headquarters in Germany, while FAW-Volkswagen and SAIC Volkswagen adapted the prototypes to the Chinese market based on their own positioning and understanding of the market.

Under the original R&D model, Volkswagen has to localize its new cars in China through joint ventures. But the low willingness of its JVs to develop BEV business has made it harder to advance its electrification strategy, 36kr noted.

As product iterations in China's new energy vehicle (NEV) market continue to accelerate, Volkswagen has had to make changes, the report said.

VCTC-led research and development of the new vehicles will be handled by Volkswagen Anhui, which will be responsible for major production, the report said, adding that production costs for Volkswagen's BEV models are expected to be reduced by 40 percent under the new approach.

Volkswagen Anhui, a joint venture between Volkswagen and Anhui Jianghuai Automobile Group (JAC) established in 2017, is the German automaker's first NEV-focused joint venture in China.

The company was initially called Jianghuai Volkswagen Automobile Co, Ltd, and at the end of 2020, Volkswagen increased its stake in the company to 75 percent and had the company renamed Volkswagen Anhui.

On July 17, Volkswagen Anhui launched its first EV model, the ID.UNYX, based on Volkswagen's MEB platform.

36kr's report noted that the composition of Volkswagen's R&D centers in Germany and Anhui are similar, and that the automotive giant still needs time to find the right mechanism to run the businesses.

VW Anhui launches ID.UNYX, its 1st EV model in China, starting at $28,900