Volkswagen is looking to keep its leading position in China by accelerating electrification and deepening localization.

The German car group saw its China sales dip 3.6 percent to 3.81 million units. However, it still had a 15.1 percent market share, the most among carmakers in the world's largest vehicle market.

It said chip shortages and COVID-19 caused production disruptions at its major plants in Shanghai and Changchun, Jilin province, and cut showroom traffic in 2022.

"Volkswagen Group and its brands have demonstrated strong resilience in a highly challenging market environment," said Ralf Brandstaetter, chairman and CEO of Volkswagen Group China, in an interview with China Daily last week.

But the executive who was put at the helm of the carmaker's China operations in late 2022 acknowledged rapid changes in the country in terms of both the vehicle market and competition from its Chinese rivals.

Statistics from the China Passenger Car Association show that wholesale sales of electric cars and plug-in hybrids hit 6.5 million units in 2022. The figure is expected to reach 8.5 million units in 2023.

Volkswagen's electric ID. vehicles saw its sales more than double to 143,000 units. It brought the car group's total NEV sales to 206,500 units. But that accounted for around just 3 percent of China's NEV segment.

The demand for NEVs also prompted BYD to overtake FAW-Volkswagen as the bestselling carmaker in China in 2022 by a margin of 26,000 units in retail sales, said the CPCA.

"China has become the pacesetter of the global automotive industry and is rapidly shifting to electric and highly connected vehicles.

"No other market has seen such rapid growth in electrification," said Brandstaetter.

He expects one in three new vehicles sold in China this year to be an NEV, up from one in four in 2022.

He said Volkswagen is pushing its electrification strategy ahead with new models and investments in charging infrastructure.

In the second half of this year, it will launch the ID.7 sedan, which will allow the carmaker to compete in the midsized sedan segment. Its premium Audi marque will also start the full-year sales of the new Q4 and Q5 e-tron SUVs.

By 2030, 40 percent of the group's models will be electrified, said Brandstaetter.

Volkswagen has also offered greater autonomy to its China operations and increased its cooperation with local companies, which is expected to enable it to better meet the fast-evolving demands of Chinese car buyers.

Brandstaetter said the company is working with Horizon Robotics to tailor driving-assist functions for its electric models sold in the country.

Back in October, Volkswagen inked a deal worth 2.4 billion euros ($2.60 billion) with Horizon, the country's leading providers of computing solutions for smart vehicles.