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Volkswagen is evaluating a plan to produce its China-designed electric vehicles at its under-utilised factories in Germany. The initiative aims to boost production output, protect domestic jobs, and optimise the use of existing manufacturing capacity.

This proposal, reportedly supported by the German state of Lower Saxony, which is Volkswagen’s second-largest shareholder, comes as the company reorganises its home production network in response to declining sales, shrinking profits, and growing competition from Chinese automakers in Europe.

Volkswagen Group chairman Oliver Blume first disclosed in April that the company was considering building China-developed models in Germany. Further details have now emerged as the group’s executive board prepares a significant restructuring plan that could reduce the number of models produced and potentially cut up to 100,000 jobs.

According to insiders at Volkswagen’s Wolfsburg headquarters, the leading candidates for local production include electric vehicles from the brand’s new Unyx range, which are being developed in China through Volkswagen’s partnership with Xpeng.

Although no formal production decision has been made, the plan reportedly forms part of a wider review on how Volkswagen can better utilise excess capacity across its German facilities.

If approved, this would mark a major shift in Volkswagen’s manufacturing approach. Instead of exporting German-engineered models to China, the company would manufacture Chinese-developed vehicles in Germany for sale in European markets.

The first potential model for German production is the ID Unyx 07, a rear-wheel-drive sedan that became Volkswagen’s first production car to use the new China Electrical Architecture (CEA) platform. Measuring 4,881 mm in length, it competes directly with the Tesla Model 3 in China.

Also under consideration is the ID Unyx 08, a 4,887 mm-long SUV that one senior Volkswagen executive described as filling the space previously occupied by the Touareg in Volkswagen’s global SUV portfolio.

A third model, the premium ID Unyx 09, is scheduled to join Volkswagen’s Chinese line-up in October. According to filings with China’s Ministry of Industry and Information Technology, the 5,081 mm-long luxury sedan will be available in both rear-wheel-drive and four-wheel-drive configurations.

Like the ID Unyx 08, the ID Unyx 09 will use a lithium-iron-phosphate (LFP) battery supplied by CATL and feature Volkswagen’s latest AI-based driver assistance system, which has been developed specifically for the Chinese market.

Volkswagen considers the Unyx programme essential to regaining its competitive edge in China, where domestic automakers have rapidly increased their market share in recent years.

The idea of producing China-developed models in Germany surfaces at a time when Volkswagen is undergoing one of the largest restructurings in its history. The company’s German factories are currently operating below capacity due to weaker-than-expected demand for electric vehicles in Europe. This has prompted the board to explore various strategies to improve utilisation rates and reduce production costs.

These discussions also open up the possibility of a deeper partnership with Xpeng. If Volkswagen goes ahead with manufacturing the Unyx range in Germany, it could eventually create a framework that allows Xpeng to assemble its own vehicles alongside Volkswagen models for the European market.

Currently, European production of Xpeng’s G6 and G9 SUVs is managed by contract manufacturer Magna Steyr at its facility in Graz, Austria.