China Approves Volkswagen for Level 3 Autonomous Trials and Clears Xpeng for Level 4 Robotaxis

China has quietly resumed its push for autonomous driving, granting Volkswagen a Level 3 testing permit in Hefei and clearing Xpeng to run Level 4 robotaxis in Guangzhou. The approvals mark a regulatory thaw following a nationwide freeze on new autonomous licenses earlier this year.[1][4]

The dual announcements signal that local authorities are again willing to put advanced self-driving systems on public roads. Regulators had suspended new robotaxi permits in April and launched a sector-wide safety review after a Baidu autonomous vehicle was involved in a collision in Wuhan.[1]

Both companies are eager to frame the permits as major milestones, but the reality on the asphalt is more constrained. These are localized road-test authorizations designed for data collection, not consumer product approvals that allow automakers to sell driverless cars to the public.[3][5]

Volkswagen's localized stack

Volkswagen’s permit allows the German automaker to test conditional automation in Hefei, the capital of Anhui province. The city serves as the company's largest research and development hub outside of Germany, housing its Volkswagen China Technology Company and a major production site.[3][5]

The German giant is not starting from scratch in the region. Volkswagen first secured permission to test autonomous cars in Hefei back in August 2020, using a small fleet of Audi e-tron SUVs to map out a limited stretch of open roads.[5]

The Level 3 designation means the vehicle can handle dynamic driving tasks under specific conditions, but a human driver must remain ready to take control when prompted. Volkswagen is using the testing to feed data into its localized autonomous driving stack, developed through a joint venture called CARIZON.[3][5]

CARIZON pairs Volkswagen’s internal software unit, CARIAD, with Chinese AI chipmaker Horizon Robotics. The partnership is building a driver assistance system marketed as Hyper Sense 8, which relies on a proprietary world model dubbed GAIA 2.0 to process complex traffic scenarios.[3]

Volkswagen claims GAIA 2.0 currently runs simulations equivalent to five million kilometers of safety testing every day, drawing on 30 million real-world video clips. The automaker eventually wants to double that simulation capacity to ten million kilometers daily as it refines the software.[3]

The company is also developing its own system-on-chip, the C7H, which it says will eventually support Level 4 autonomy. Ralf Brandstätter, chief executive of Volkswagen Group China, stated that the automaker will never advance its technology at the expense of safety.[1][3]

"With this permit, we can test in real traffic in Hefei and collect data at scale," Brandstätter said. "It is the next step on our road to Level 3 readiness."[5]

Volkswagen is officially targeting Level 3 technology readiness in China by 2027, with Level 4 capabilities slated for 2029. However, the company is currently playing catch-up in a market where domestic rivals are already deploying advanced highway and city navigation features.[3][5]

Xpeng drops the driver

While Volkswagen focuses on conditional automation, its Chinese partner Xpeng is pushing further up the autonomy scale. The Guangzhou-based electric vehicle maker received approval to conduct Level 4 demonstration operations across its home city, moving its robotaxi program out of closed testing.[1][4]

Level 4 systems are designed to operate without any human intervention within a defined geographic area. Xpeng’s robotaxi service, branded as Xpeng Yoyo, will initially operate through an invitation-code system rather than opening immediately to the general public.[1]

Before securing the citywide permit, Xpeng spent months running internal trials with its own employees. The company reportedly completed more than 2,000 test orders over the summer, charging a symbolic fee to validate its booking and payment software alongside the driving system.[5]

The robotaxi fleet is built on Xpeng’s flagship GX sport utility vehicle. Instead of relying on expensive LiDAR sensors and high-definition maps, the company is using a vision-only approach powered by its second-generation Vision-Language-Action model.[1][4]

To process the visual data, each vehicle is equipped with four of Xpeng’s proprietary Turing AI chips. The company advertises the hardware setup as delivering 3,000 TOPS of effective computing power, a massive figure designed to handle complex urban edge cases.[1]

Despite building the vehicles, Xpeng does not intend to become a massive fleet operator. The company plans to act primarily as a technology supplier, licensing its autonomous hardware and software stack to established ride-hailing platforms in China and Europe.[1]

Chief executive He Xiaopeng has set an aggressive timeline for the robotaxi division. He stated in August that Xpeng aims to carry passengers without safety drivers in the vehicles by 2027, a target that requires flawless execution during the current Guangzhou trials.[1]

The regulatory reality

The 2027 target date shared by both Volkswagen and Xpeng aligns with a looming regulatory shift. China recently issued a mandatory national safety standard for vehicles equipped with Level 3 and Level 4 automated driving systems, which takes effect in July 2027.[5]

That standard will dictate strict requirements for human-machine interaction, specifically focusing on how systems notify drivers to prevent misuse. Until those rules are active, the Ministry of Industry and Information Technology is keeping a tight grip on consumer approvals.[5]

To date, the ministry has only granted conditional Level 3 product approvals to two domestic models from Changan Automobile and BAIC Motor. Those vehicles are strictly capped at low speeds and confined to designated expressways in Chongqing and Beijing.[3][5]

For Volkswagen, the Hefei permit is a necessary step to ensure its software can navigate China's chaotic urban traffic before the 2027 regulations open the market. The automaker is leaning heavily on its partnerships, including a 2023 stake in Xpeng, to accelerate its timeline.[4][5]

The coming months of testing will reveal whether simulated kilometers and massive computing power can translate into reliable physical driving. Both companies now have the regulatory clearance to gather the data they need, but turning those test miles into a profitable product remains an unsolved challenge.[1][3]