In today’s automotive industry, carmakers can’t just stubbornly continue following their decades-old script. They have to constantly adapt by riding the wave of new technologies, or risk extinction. It seems like Volkswagen finall understands this reality, especially in its second-largest market: China. The automaker’s sales suffered a setback in China in 2024, facing competition from a surge of low-cost and high-quality electric vehicles from the country’s homegrown automakers.
Now, Volkswagen is plotting a comeback centered around AI and advanced driver assistance systems (ADAS) in an attempt to regain lost ground.
Welcome to the Friday edition of Critical Materials, your daily round-up of news and events shaping up the world of electric cars and technology. Also on our radar today: Japanese automakers are collaborating to make their automotive chips more competitive against those used by Chinese automakers. Plus, China holds fewer but higher-quality EV patents than the rest of the world, indicating that the country’s edge in EV technology is expanding.
30%: VW’s China Comeback Plan
Photo by: Volkswagen
Last year was a harsh reality check for the VW Group in China. The group’s sales plummeted by nearly 10% in 2024, in what was once its largest market. It’s getting increasingly harder for Western automakers to rival Chinese behemoths like BYD and Geely, which are coming out with a flood of low-cost and high-quality EVs. Many of them also pack cutting-edge ADAS tech.
At next week’s Auto Shanghai, Volkswagen will reveal its new AI-powered ADAS platform, which the company claims will enable automated systems that can one day drive like humans.
The platform is co-developed by the joint venture between Volkswagen’s software division Cariad and Chinese tech giant Horizon Robotics. The JV is called Carizon. It claims to have developed the software platform in just 18 months. It will initially support Level 2++ automated driving, forging the path for Level 3 and higher. (L2+ or L2++ are terms used to describe systems that fall between SAE L2 and L3, but they don’t necessarily mean anything specific.)
Its platform, developed by some 500 software engineers in Shanghai and Beijing, can collect two terabytes of data per vehicle per day and record 100,000 kilometers (62,000 miles) of test driving information daily. A new passenger vehicle using this ADAS platform—likely fully electric—will be revealed in China later this year.
Volkswagen is hoping to democratize the technology. It will also be integrated into the China-specific Compact Main Platform (CMP), allowing more affordable vehicles to benefit from the feature.
It remains to be seen what type of hardware approach Volkswagen will combine with its full-stack ADAS software. Tesla, for example, only uses AI and camera-based vision technology for its Autopilot and Full-Self Driving (Supervised) ADAS systems. Alphabet’s Waymo, on the other hand, uses a far more robust sensor suite, including radar, lidar and cameras.
Even though the VW Group’s sales increased in North America, South America and the Middle East/Africa last year, the growth was nowhere near enough to offset the huge decline in China. However, jumping on the self-driving car bandwagon might be worthwhile for the group, as China is already testing more driverless cars than any other country.
As of January 2025, at least 19 cities in China had permitted automakers to test autonomous driving technology on public roads. The effort is led by tech giant Baidu, WeRide, BYD and others. While the growth is much slower in the U.S. and other parts of the world, the EV revolution is coinciding with a growing number of partially-automated cars. Note, however, that China is also having a problem with marketing that implies that many driver-assistance systems are actually autonomous, which is why the country is finally cracking down on ADAS marketing and update cadence.
InsideEVs’ Patrick George and Kevin Williams will also be on the show floor at Auto Shanghai next week. Keep an eye out for glimpses of cutting-edge EV technology from the other side of the planet on our website and social channels.
60%: Toyota, Nissan And Honda Team Up For Semiconductors
NVIDIA DRIVE Orin system-on-a-chip
The adage “adversity breeds unity” has never been more true for Japanese automakers. With China racing ahead in EVs—and also pulling ahead in autonomy—Japan’s car companies are feeling the heat. Now, they’re banding together to design their own chips, aiming to slash costs, speed up development and claw back lost ground.
Toyota, Honda and Nissan have formed a consortium called ASRA to create a standardized design for next-gen semiconductors to be used in cars, reports Nikkei. The head of this project acknowledged that Japan was lagging in the development of software-defined vehicles and autonomous driving. The first chips from this project are expected to be ready by 2029.
Here’s more from that report:
The consortium plans to utilize a concept called chiplets, or tiny integrated circuits with specific functions that can be combined into larger packages.
The difference between Chinese and Japanese intelligent vehicles does not lie in the capabilities of the chips they use, according to Thaddeus Fortenberry, vice president of automotive at U.S. chip startup Tenstorrent.
“Chinese auto manufacturers only have two things they care about: How fast can they get it? How much does it cost?” Fortenberry told Nikkei Asia. “If I talk to them about the details of the architecture … they completely don’t care.”
Chinese car manufacturers, he said, are approaching automobile development in the same way they did with smartphones, mass-producing and commodifying the inner workings.
The consortium has received a $286 million subsidy from the Japanese government, which highlights the country’s urgency to catch up with China. The standardized chips are claimed to be scalable, like a common car platform, and can save costs. A base car would only need a single chip, whereas a driverless EV would use a series of chips and an AI chip, as per the report.
90%: China Leads The World With More Quality EV Patents
Photo by: BYD
In the EV industry, the quality of patents filed is more important than the quantity, according to another Nikkei report highlighting the gulf between China and the rest of the world in the EV race. Chinese automakers hold fewer EV-related patents than legacy automakers but they are more relevant in today’s world and more impactful.
Toyota owns over 6,000 EV-related patents. That’s more than any other automaker, followed by Volkswagen (2,464), Hyundai (2,250), Honda (1,933) and Ford (1,539), according to Japan’s Mitsui & Co. Global Strategic Studies Institute. Chinese companies aren’t even in the same league when it comes to overall patent count. BYD holds just 828 patents, followed by Huawei with 285 patents and CATL with 263.
But when the institute ranked the patents using a different metric, based on technological impact, number of citations and licensing scope, Chinese companies ranked the highest. CATL, the world’s largest battery maker, has the highest impact score, followed by Korea’s LG Energy Solution. Huawei, Alton New Energy and BYD—all Chinese OEMs—complete the top five.
100%: Is Patent Licensing China’s Weapon Against U.S. Tariffs?
CATL Shenxing Plus LFP battery
The Trump administration announced a 90-day pause on its tariffs on imported goods from all countries. The tariffs on the auto industry and on China were exempt from this pause.
CATL already has licensing agreements with Ford to build lithium-iron phosphate (LFP) battery packs here in the U.S. While Ford gets to build those batteries locally and avoid tariffs, CATL will likely earn hefty royalties by sharing its technology. General Motors is also in talks with CATL for a similar deal.
Can this be a tool that Chinese companies increasingly deploy against American protectionism? And is that a sustainable proposition for American OEMs while Chinese companies continue to grow their advantage?
Leave your thoughts in the comments.
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