German automotive giant Volkswagen has announced a groundbreaking partnership that could reshape its competitive position in the world’s largest car market. The collaboration with Chinese artificial intelligence specialist Horizon Robotics represents a strategic shift toward localized technology development. This move comes as European automakers face intensifying pressure from domestic Chinese competitors who have gained significant advantages in smart driving capabilities.
Carizon’s joint venture focuses on advanced semiconductor development
Volkswagen has announced that its software-focused affiliate, Cariad, has launched a new joint venture called Carizon alongside Horizon Robotics, aiming to develop its first System-on-Chip on its own for China’s next-generation intelligent and connected cars. Carizon’s new chipset is intended to enable Volkswagen’s advanced assist systems and autonomous driving solutions for its range of vehicles sold in China. By this collaboration, Volkswagen is expected to leverage its automobile sector expertise, while Horizon Semiconductor has expertise in AI integrated circuits.
This partnership is a reflection of Volkswagen’s dedication to its “In China, for China” policy, expanding on its localization strategy and excelling in basic technologies that define future mobility patterns. According to Ralf Brandstatter, Volkswagen China’s Chairman and CEO:
“The Volkswagen chip will be developed keeping our Chinese customers in mind.”
SoC is expected to have a computing capacity of 500-700 tera operations per second, putting it on target to compete effectively with Nvidia’s new processor, ‘Thor,’ that has a computing rate of 700 TOPS. Such computing power is enough to facilitate its application in autonomous vehicles that require complex processing operations.
Market positioning strategy addresses competitive pressures
Volkswagen is pouring over €200 million into this new project, as reported by insiders, marking one of the biggest foreign investments by any carmaker into China’s development of semiconductors. Such huge funding indicates Volkswagen’s efforts towards reclaiming its edge within China’s growing market of electric vehicles, through which it has been losing market share to local rivals.
It is expected that the investment period would be three to five years for the chip supply, and the SoC would be developed exclusively for China’s complex road environment and typical driving patterns that are quite different from European or American ones, as it has its own set of challenges, unlike European or American markets.
Launch of chip development is based on the commencement of mass production of Carizon’s first ‘Advanced Driver Assistance System’ solution that took place in 2025, and is set to be followed by market availability of Carizon’s first Volkswagen model vehicles equipped with it in 2026. This move helps Volkswagen compete favorably against Chinese EV brands that have already used their ‘smart driving’ chips.
Strategic response to Chinese market dynamics
Volkswagen’s initiative on semiconductors is part of larger sector trends, especially as Chinese EV competitors Nio and Xpeng have integrated smart chips into their systems for improvement of their market positions. Nio launched its semiconductors project in 2021 and showcased its Shenji NX9031 Smart Driving Chip in December 2023, while Xpeng has developed Turing AI, boasting more than 700 TOPS per unit across its range of vehicles.
The move is coming at a time when the German automaker has lost substantial market share in China, a market it dominated annually as one of its founding members that established its Shanghai-based joint venture back in 1984, only to be dethroned by BYD as its market leader in 2023, having recorded car sales of 2.9 million last year, down by 9.5 percent from the previous year.
Volkswagen has one last shot at catching up technologically through this ambitious microchip initiative, as failure will see it always play a distant second to more advanced Chinese carmakers. Even though this is an investment of €200 million, it is most imperative as far as Volkswagen’s future success is concerned, especially considering that it is occurring in the most significant market worldwide—China.