From factory to tech frontier: China becomes legacy automakers' innovation engine

From factory to tech frontier: China becomes legacy automakers' innovation engine

Reuters — 2026-07-08

Automotive Industry

In May, General Motors (GM.N), opens new tab marked a rare milestone for a foreign automaker in China, selling more than 10,000 of its new Buick Electra E7 in the first month.

While the nameplate is all-American, everything ​else about the car is Chinese — it was developed entirely at the technical centre GM runs with local partner SAIC (600104.SS).

GM plans to export the car to South Korea and use its China-built ‌platform in the next iteration of the Cadillac Optiq, said a person with direct knowledge of the plans, which are reported here for the first time.

For years, global automakers used China as a low-cost manufacturing base to churn out cars developed at headquarters. Now, GM, Volkswagen (VOWG.DE), opens new tab and Renault (RENA.PA), opens new tab are handing development to Chinese engineers, leveraging the country's growing advantage in critical technology such as electric powertrains and advanced software.

China teams are getting more autonomy, too. As a result, headquarters no longer call all the shots, said Zhu Yulong, a former GM engineer in ​China and now an independent auto analyst.

With the Electra, "the product definition and technical roadmap are for the first time firmly in the hands of the China team," Zhu said.

A GM China spokesperson declined to comment ​on potential exports or future market plans but said it was focused on developing vehicles and technologies that resonate with customers in China and elsewhere.

While China-developed technology was once ⁠meant only for the local market, it is increasingly being adapted to rollout globally, auto executives and analysts said.

The new Buick uses the Xiao Yao platform developed by engineers at SAIC-GM's Pan Asia Technical Automotive Centre (PATAC) in Shanghai, ​which has some 3,000 staff, according to SAIC-GM.

Xiao Yao — the name comes from a Daoist term meaning "freedom from burdens" — features a 900-volt supercharging system and a plug-in hybrid powertrain and delivers what SAIC-GM said is market-leading fuel efficiency.
Its features ​aren't available on Detroit-developed GM models.

Using Xiao Yao in the new Optiq would replace the Detroit-developed Ultium platform used in previous Optiq models, according to the person, who spoke on condition of anonymity.

While the Xiao Yao-based Electra has been a hit for GM in China, models built on the Ultium saw sluggish sales.

Shifting R&D to China helps traditional automakers bulk up their tech abilities.
"Legacy automakers are manufacturing companies trying to adapt to a world of tech,” said Pedro Pacheco, vice president of research at Gartner. “They went to the place – ​China, where they know they're going to find tech talents."

DEVELOPED IN CHINA, FOR EUROPE

Renault's Shanghai tech centre developed the Twingo E-Tech compact that is being made and sold in Europe. While South Korea's Hyundai (005380.KS), opens new tab has struggled to ​sell cars in China, it is still investing in the country, planning to make China an R&D and export hub.

Volkswagen's Audi marque has announced plans for an R&D centre that will have full autonomy over development for its new Chinese brand, AUDI.
‌SAIC Audi's Stefan ⁠Poetzl said the move was prompted by the early success of the AUDI E5 Sportback and marks a departure from adapting German technology for China.

The car has "intelligent air suspension" that uses sensors to predict vertical motion and deliver a smoother ride. A hit among Chinese drivers, the feature is absent in the E5's rival, the Mercedes CLA, which was built on a global platform developed in Germany and adapted for China.

Since launching in late 2025, the E5 has outperformed the CLA in China, averaging 910 monthly sales compared to the CLA's 296, according to automotive consultancy ThinkerCar. Audi said it has no plans to export the E5 from China but European car enthusiasts took to social media late last ​year to question the E5's unavailability in their market.

Mercedes ​said the CLA EV was positioned as a niche ⁠model instead of a "volume pillar", adding it was strengthening efforts on "100% China-fit products".

Global automakers need R&D in China because typically, overseas headquarters "don't respond quickly enough to the pain points of the Chinese market,” said Chang Yan, founder of EV blog Supercharged.

In Germany's auto industry, the share of R&D conducted in China for both local and global markets has ​surged to 33% from 12% in two years, the German Chamber of Commerce in China said.

"Knowledge flow is no longer a one-way street," said Oliver Oehms, the ​chamber's executive director for North China.
 

TALE OF TWO AUDIS

Delegating R&D to China has raised concerns within automakers about branding consistency — an issue for brands known for, say, German engineering.

Audi has addressed that through its dual-brand strategy in China: technology from the new R&D centre will go to the four-letter AUDI brand, while the legacy four-ring marque will stick with German-developed technology.

The approach "separates positioning, target customers, and corresponding technological solutions for each brand," Audi said in a statement to Reuters.
Shifting R&D also risks internal culture clashes and even political ⁠backlash for automakers, ​analysts and executives said.

Moving too much brainpower to China could hurt automakers’ home ecosystems, including suppliers, and can be seen politically as a ​strategic loss, said Gartner's Pacheco.

Renault's Twingo project gives a glimpse of potential tension. Renault used its China centre to develop the Twingo E-Tech in just 21 months, a timeframe Chief Technology Officer Philippe Brunet called "remarkable".

But the project faced skepticism at headquarters over quality standards and local engineers’ long ​hours.

So Renault began rotating French engineers to China.

"The more they come, the better it is for us because they will return to France explaining things," Brunet said.