Inside CARIAD China: The Role in Volkswagen Group‘s Software Strategy

As the automotive world turns its attention to the Shanghai Auto Show, China once again reinforces its position – not only as the largest auto market globally, but as a pioneer of the intelligent, connected mobility era. At the heart of this transformation is CARIAD China, Volkswagen Group’s local software arm, driving its development efforts rooted in the Group’s strategic principle: “In China, for China.”

China: The World's Most Dynamic Automotive Market

China's influence on the global automotive industry has never been stronger. Its rapid shift toward electrification and smart technologies is unmatched: Passenger car sales are projected to grow from 23.4 million in 2024 to 28.5 million by 2030. New Energy Vehicles (NEVs) already command more than 50% market share as of Q3 2024: PHEVs/EREVs are set to double in volume by 2030, while BEVs maintain strong growth.

China isn't just a large market – it's setting new standards in speed of innovation, digital sophistication, and user expectations. These developments are accelerating Volkswagen Group's transformation within the region, reshaping the way cars are developed, connected, and experienced.

Digitalization: The Gateway to Next-Generation ICVs

To remain competitive in this fast-evolving landscape, the Volkswagen Group has made digitalization a strategic imperative. The emergence of Software-Defined Vehicles (SDV) is revolutionizing the industry – and Volkswagen is rising to meet this challenge by fully digitizing its local model portfolio in China.

At the heart of this shift is CARIAD China, the Group's digital backbone in the region. Backed by a team of over 1,000 in-house experts across Hefei, Shanghai, and Beijing, CARIAD China develops end-to-end software and systems, backed by its three dedicated innovation arms:

• CARIZON for the development of Advanced Driver Assistance Systems (ADAS)
• CARIATIVE, developing User Experience and User Interface (UX/UI)
• CARThunder, focused on Smart Cockpit solutions

CEA: A New Software Architecture for Intelligent Mobility in China

This digital transformation is built on a new foundation: the China Electronic Architecture (CEA). Co-developed by CARIAD China, Volkswagen Group China Technology Company (VCTC) and XPeng, the CEA is a next-generation software platform tailored to China's dynamic digital ecosystem and fast-evolving local customer demands. Starting in 2026, all locally produced, all-electric Volkswagen vehicles in China will run on the CEA. Built by a 100% locally based, coding-focused team, it offers a flexible and agile foundation for Volkswagen's next-generation Intelligent Connected Vehicles (ICVs).

The CEA enables:

• Centralized computing power
• Simplified and modular vehicle control
• Frequent, full-vehicle Over-the-Air (OTA) updates
• Real-time integration of AI and connected digital services

This architecture allows forenables faster innovation cycles, seamless ecosystem integration, and tailored customized feature sets for Chinese consumers.

CEA in Action: Future-Ready Applications

With the CEA as the technological enabler, CARIAD China is building the software that will define the next generation of vehicles-across three core domains:

Advanced Driver Assistance Systems (ADAS)

China is a global frontrunner in ADAS adoption: Level 2+ and above ADAS penetration is already around 50% in 2024, while Level 3+ and above capabilities are forecast to reach 35% by 2030.

To lead in this space, CARIAD and Horizon Robotics established CARIZON in late 2023 – a joint venture dedicated to AI-powered software and hardware solutions of ADAS. With more than 500 engineers, CARIZON drives Volkswagen's mission to localize, accelerate, and scale automated driving features for China.

Smart Cockpit

The in-car experience is being redefined by CARThunder, a joint venture between CARIAD China and ThunderSoft. By merging CARIAD's system integration and Volkswagen's platform expertise with ThunderSoft's specialization in operating systems and HMI, CARThunder focuses on:

• Infotainment and digital connectivity
• Advanced Human-Machine Interaction (HMI)
• Cloud-based services and in-car app ecosystems

CARThunder enables personalized, seamless digital experiences that reflect the evolving preferences of Chinese drivers.

UX/UI Innovation

CARIAD China's CARIATIVE team is reshaping how users interact with vehicles. As an integrated team between CARIAD China and ARK, CARIATIVE expands its capabilities in developing intuitive, localized UX/UI systems across all Volkswagen Group brands. The result: emotionally engaging, culturally relevant interfaces that create stronger connections between driver and vehicle.

From Shanghai to the Future: Built from the Inside Out

This year's Auto Shanghai is more than a showcase of new models – it's a demonstration of how China is setting the pace for the automotive future.

CARIAD China is at the center of that shift. With a deep local presence, strategic joint ventures, and cutting-edge development teams, it is turning the "In China, for China" vision into real-world innovation that will influence not just Chinese roads – but mobility worldwide.