In late September, the 2026 World New Energy Vehicle Conference opened in Haikou, Hainan. With the theme of "transformation, upgrading and resilient growth", the conference set up a main forum, 10 thematic forums, 3 closed-door meetings and 6 simultaneous conference activities, bringing together guests from more than 20 countries and regions and representatives of global new energy automobile industry chain enterprises to exchange on hot spots such as industrial transformation, intelligent networking, and automobile going to sea. Ralf BRANDSTÄTTER, Member of the Board of Management of Volkswagen AG, Chairman and CEO of Volkswagen Group (China), delivered a speech at the main forum on the theme of “Transformation and upgrading and low-carbon development”. In his speech, he said that the competitive landscape of the entire industry is undergoing a fundamental reshaping. According to Volkswagen's forecast, the annual sales volume of China's passenger car market will drop by about 20% in 2026, and the total sales volume will fall back to about 20 million, equivalent to 4.5 million fewer vehicles than in 2025. At the same time, new cars tend to reach peak sales within 3 months of launch, and consumers' attention will soon turn to the next generation of brand-new products. In the past, a model could maintain a product cycle of about 7 years, but now it has been greatly reduced to about 3 years, and even the models on sale have to complete a major iterative upgrade almost every year. However, Barrett believes that the rapid adoption of technology is a remarkable industry achievement in itself, but as the pace of diffusion of innovation continues to accelerate, the difficulty for companies to transform technology into business value continues to increase. At present, the spread of more advanced technologies has not created a reciprocal premium, resulting in great pressure on economy and profitability. In the first half of 2026, the average profit margin of the Chinese automobile market has fallen to about 1.5%. Based on these phenomena, Barry put forward an important point: the core problem of the automotive industry today is not “how to achieve innovation”, but “how to translate innovation into sustainable value creation”. Barrett emphasizes that healthy profitability is never the end in itself, it is the foundation of all long-term investment - companies invest in the next generation of cutting-edge technology and ensure quality and safety. To create sustainable long-term value, speed must be deeply integrated with technological autonomy and the ability to scale, while balancing high quality with cost competitiveness. Competition is the key to the market, and it can help companies accelerate their growth and spawn more innovation. However, Barrett also believes that competition must remain on a sustainable trajectory at all times. If innovation loses its business sustainability, the entire value chain is impacted. Companies do not have the ability to continue to invest, and the pressure on suppliers continues to climb, which will also impact customers' trust in the brand. That's why Barryd calls for the industry to be more committed to “sustainable value creation.” Innovation, quality, safety and economic sustainability must support each other in a positive way. The industry and relevant authorities should work together to create a healthy, fair and sustainable market environment. The following is the original text of the speech (autohome compilation): Dear guests, ladies and gentlemen, I am honored to be able to participate in today's conference. First of all, allow me to express my sincere gratitude to the organizers for creating this important exchange platform for our colleagues in the industry. Today we gather to discuss one of the most profound changes in the history of the automotive industry. Undoubtedly, the core frontier of this change is in China. China has grown into the core engine of the global new energy mobility industry, building a world-leading new energy vehicle industry ecosystem: strong policy support, highly focused R&D investment, a strong supply chain system, extensive charging infrastructure, and an amazing pace of innovation. China is writing the future of the automotive industry. But as the industry enters a new phase of transformation, we must also face a key question: how can this strong innovation strength be translated into sustainable value creation across the industry? Because the next stage of transformation can't stop at the innovation itself. It must be an innovation that can create long-term value for users, support continuous investment, strengthen technology research and development, talent construction, quality and safety, and promote the healthy and sustainable development of the entire automotive industry. These abilities are being put to the test right now. Over the past 18 months, the overall market environment has faced significant challenges. Consumer confidence is weak, geopolitical tensions continue to escalate, and the adjustment of new energy vehicle subsidy policies has brought additional pressure to the industry. In 2026, the annual sales volume of China's passenger car market is expected to fall by about 20%, bringing the total sales volume back to about 20 million vehicles. This equates to 4.5 million fewer vehicles than in 2025. From the perspective of volume impact, the impact of the current market shrinkage has been comparable to the impact of the COVID-19 pandemic in that year. But the challenge goes far beyond sales. At the same time, we clearly see that the competitive landscape of the entire industry is undergoing a fundamental reshaping. New cars now tend to reach peak sales within three months of launch, and consumers' attention will soon turn to the next generation of brand-new products. In the past, a model lasted for about seven years, but now it has been drastically reduced to about three years, and even the models on sale have to complete a major iterative upgrade almost every year. Since the beginning of 2026, more than 500 new or modified models have been launched in the Chinese market. At the same time, cutting-edge configurations such as intelligent driving, artificial intelligence, and fast charging technology are penetrating into more market segments and covering a wider price range. The rapid adoption of technology is a remarkable industry achievement in itself, allowing more users to enjoy a more advanced mobility experience and driving technological progress across the industry. However, with the continuous acceleration of the diffusion of innovation, the difficulty of transforming technology into business value continues to increase, and R&D investment needs to be completed in a shorter period of time. While more advanced technologies are popularized, they do not create a reciprocal premium, resulting in great pressure on economic efficiency and profitability. The average profit margin in the Chinese auto market has fallen to around 1.5%. It also raises a defining question for our industry as a whole: the central challenge today is no longer “how to innovate”, but “how to turn innovation into sustainable value creation”. Healthy profitability is never the end in itself, it is the foundation of all long-term investment - companies invest in the next generation of cutting-edge technology and ensure quality and safety. For the Volkswagen Group, responding to this profound transformation requires us to fundamentally reshape the overall operating model. Three years ago, we officially launched the largest transformation plan in the history of the Group, which will completely change the business model from "originating in Europe and serving China" to "in China and for China". We do not simply produce products locally, but have product development capabilities locally. The core engine driving this deep transformation is Volkswagen (China) Technology Co., Ltd. (VCTC), which is rooted in Hefei. VCTC is our largest R&D center outside of Germany, where more than 3,000 R&D staff work side by side to develop the next generation of new energy vehicle technology. The decisions and final approvals are all completed locally, and the hardware and software teams achieve full parallel development. We also deeply integrate AI technology into the entire R&D process to achieve efficiency improvement and growth. Let me share a real-life example. Gaia 2.0 is our self-developed world model and data system specifically designed to train Volkswagen's advanced driver assistance systems. It creates a highly simulated virtual driving world that can generate up to 30 million highly resilient driving scenarios. With this system, we can continuously train, test and optimize the intelligent driving system, and can cover a large number of extremely rare working conditions that are extremely difficult to reproduce on real roads. Gaia 2.0 can process 4TB of training data per day, which is equivalent to completing about 10,000 kilometers of real road tests per day. With this system, our R&D can be up to 50 times faster than traditional models. This is the concrete landing of the "In China, for China" strategy: local decision-making powers and responsibilities, local core technologies, and a completely different development pace. But speed alone is not enough. To create sustainable long-term value, speed must be deeply integrated with technological autonomy and the ability to scale, while balancing high quality with cost competitiveness. For this reason, we have built a complete local technology matrix around three core elements: the first core element is our new generation of locally developed vehicle platform. These platforms cover all core segments of the new energy circuit, from the mainstream to the high-end market, and fully support the three mainstream power routes of pure electric, plug-in hybrid, and extended range. These platforms will provide users with richer choices, better unlock scale and flexibility, and build stronger cost advantages. The second core element is software and vehicle electrical and electronic architecture. In just 18 months, we developed our own CEA Electrical and Electronic Architecture. It is a powerful digital base for our next generation models, supporting continuous vehicle OTA upgrades and deep AI capability integration. At the same time, CEA is built for scale and can be adapted to both electrified and fuel models. The third core element is smart driving. Through our joint venture with Horizon, CoreCourse, we have developed our own full-stack smart driving solution, HyperSense8. From the second half of 2026, the new generation of new energy vehicles of the Volkswagen brand has realized the in-depth integration of CEA electronic and electrical architecture and local self-developed intelligent driving technology, bringing solid L2 + + advanced driving assistance functions to provide users with a natural, safe, reliable and anthropomorphic driving assistance experience. The system has logged more than 100 million kilometers of training and continues to learn and grow every day. We plan to achieve the technical capability of Level 3 autonomous driving by 2027. At the same time, we are self-developing automotive-grade system-on-chip (SOC) with L4 capability, providing strong support for the full product matrix in the Chinese market. Vehicle platform, electronic and electrical architecture, intelligent driving, these three technologies are not isolated islands, but a fully integrated system. They are all developed locally in China and can be scaled up on our products. The Chinese market has more than 100 vehicle companies, and only a few companies can master these three core technologies at the same time and achieve large-scale mass production. Volkswagen is one of them. FAW-Volkswagen ID. The aura T6 is one of the first models to truly land on our strategic vision of “in China, for China”. At the same time, while realizing the landing of technical capabilities, we firmly grasp the key qualities that customers attach most importance to Volkswagen: safety, reliability and high quality. At the same time, we know the core expectations of Chinese consumers: smart and easy-to-use technology, emotionally resonant design, and a seamless digital experience. This is the answer we gave to the Chinese market: combined with German Seiko, the speed of innovation in China, and the scale effect of Volkswagen. Ladies and gentlemen, technology can create real value only if it is truly delivered to the user. The Volkswagen Group's largest new energy product offensive in China's history has been fully launched. Throughout 2026 alone, the Group's brands and joint ventures will launch more than 20 NEV models. In the first half of this year, we have launched a number of heavy-duty models, including the ID of the Volkswagen brand. Era 9X, Gongzhong 08, Gongzhong 07, and the new Audi branded model E7X built for the Chinese market. Entering the second half of 2026, our product offensive will continue to shift and accelerate. Ladies and gentlemen, for 42 years, Volkswagen has been deeply involved in and supported the entire process of China's automotive industry from its inception to its growth. Because of this, the healthy development of the Chinese market has always been closely related to us. Competition is the key to the market, and it can help companies accelerate their growth and spawn more innovation. However, competition must remain on a sustainable trajectory at all times. If innovation loses its business sustainability, the entire value chain is impacted. Companies do not have the ability to continue to invest, and the pressure on suppliers continues to climb, which will also impact customers' trust in the brand. That is why we are more committed to “sustainable value creation”. Innovation, quality, safety and economic sustainability must support each other in a positive way. The industry and relevant authorities should work together to create a healthy, fair and sustainable market environment. Therefore, we welcome the anti-internal measures already taken by the Chinese government and look forward to seeing more effective follow-up measures. This is in the common interest of the entire industry and the interests of consumers. Finally, let's turn our sights from China to the broader stage. In recent years, China has grown to become a hub for global automobile exports. In the first half of 2026, China exported nearly 4.5 million passenger vehicles, an increase of more than 70% year-on-year. The Volkswagen Group will also be deeply involved in this process with a more proactive attitude. We want to precipitate the ability in the Chinese market and achieve large-scale landing in more overseas markets. Facing the future, we will rely on the highly competitive local vehicle platform and CEA electronic and electrical architecture to better meet the needs of the "Global Southern Market". At the same time, we are also continuing to expand our business of exporting complete vehicles from China. Our models have now been exported to the Middle East and Central Asia markets, and we will further expand into more markets such as ASEAN and South America in the future. For Volkswagen, China means more than the market itself. China is increasingly the source of the Group's global core competitiveness and the core engine driving innovation across the Group. Nowadays, the strategy of "in China, for China" is upgrading to "based on China, going to sea and far". Based on this, we will further contribute to achieving the high-quality development goals promoted by the Chinese government. These results can only be achieved through close collaboration with long-term joint venture partners such as SAIC, FAW, JAC, and various technology partners. We will continue to work together to open up new growth opportunities. Ladies and gentlemen, I mentioned at the beginning of my speech that China is rewriting the future of the automotive industry. The Volkswagen Group is also determined to be a co-founder of this future. We have fully entered the delivery model, both in China and for the wider overseas market. Thank you all!.