How Volkswagen's flying car dream crashed in China

Volkswagen, China's leading automaker for years, looked beyond the streets it dominated in 2019, and set out to take a piece of space.

VW had a vision of a battery powered airborne vehicle. The 82-year old manufacturer needed Chinese technology and design to make it a reality.

The German automaker wanted to work quickly with a startup team in Beijing in order to create a?flying car, a challenge that Porsche and Audi had failed to meet. VW was to deliver what they called a "luxury, futuristic drone" that could transport four rich passengers in style. It was intended to sell them vehicles that could fly between cities such as Beijing and Tianjin with a noise level half that of a helicopter. (Read the full story at?.com)

In a video for 2022 posted on the Volkswagen website, VW project leader Zhou Jin stated that this segment has a strong potential to be a major market segment.

Volkswagen is still grounded, even though local startups are preparing to launch flying cars in China. Volkswagen's flying car effort could not match China's low altitude economy. This is the aviation industry's term to describe an emerging market that includes drones, air-taxis and other aviation service aimed at airspace under 1,000 meters. Local rivals, government and supply chains have moved more quickly in China than VW. VW is a legacy company with a culture that values deliberation and compliance. VW's stumbling is another example of how older automakers are losing business rapidly to Chinese competitors.

The project's failure also highlights the shifting legal risks that foreign companies face in China. VW faced a 5-year legal battle with a Chinese partner who claimed that VW had violated trade secrets when developing flying cars. Western companies have accused Chinese firms for years of stealing their technology. There is also a criminal investigation into?Zhou, the Chinese manager who VW promoted as its face of innovation.

Emerson Xu is the CEO of NexAvian, and former China director of air-taxi manufacturer Volocopter. He said that Volkswagen's experience shows just how "brutally select" China's mobile industry has become. "If you are not Chinese enough, or faster, or both, then you will not stand a shot."

Volkswagen's spokesperson stated that the automaker would not comment publicly on its development of flying cars or the case brought against Zhou, its employee. The spokesperson stated that "we are convinced the allegations brought against us have no substance."

Zhou said, "I can't understand why I was left to deal with a criminal matter I was innocently involved in by simply carrying out my job duties." I have repeatedly asked the company to intervene and resolve the commercial dispute fully.

Volkswagen's battle to bring a flying vehicle to market, and how the company ended up killing the project in 2024, has never been reported before.

This report includes hundreds of pages from Volkswagen documents relating to its plans for flying cars, including planning papers, legal documents, and corporate communications. The reporters also interviewed five individuals with knowledge about the project and reviewed disclosures made by former VW partners regarding flying-car development. VW is still partnering with Chinese companies, such as automaker Xpeng to help with electric cars and Horizon Robotics for autonomous driving. The company has made such agreements because it has been losing sales and market share in the largest auto market to Chinese brands. VW's sales in China peaked in 2019 at 4.2m but dropped to 2.7m last year. This has pushed the automaker down to third position behind rivals BYD & Geely. VW's profits have been hammered by these struggles, as well as mounting pressure from its German manufacturing network and U.S. Tariff costs. In recent weeks, the company announced plans to cut vehicle models and up to 100,000 positions as it scrambled to stabilize its business.

Early, then overtaken

Volkswagen joined the rush of automakers to adopt electric vertical takeoff-and-landing (eVTOL). The term "flying cars" is often used by automakers to describe the new sector, alongside eVTOL.

The idea was simple. Electric flying cars would reduce travel times in crowded cities, and car manufacturers could reinvent themselves to investors as "mobility companies". Toyota, for instance, invested in Joby Aviation, an air taxi startup in New York that has recently tested air cabs. Porsche Consulting, a VW management-consulting arm, promoted an industry it estimated could be worth $32 billion by 2035. VW's Porsche brand partnered with U.S. aerospace giant Boeing, while Audi's sister brand teamed up with Europe's Airbus to develop flying cars. Both ventures failed to produce a product that was commercially viable, so Volkswagen executives turned their attention to China, the auto market in which they dominated at the time.

The market for flying cars was relatively open when VW started its China project in 2019. The race was tightening dramatically by the time the project closed in 2024. China's government made the "low altitude economy" a strategic national priority in those five years. This attracted a flood of local competitors.

According to CCID Consulting (a Chinese think tank affiliated with the Chinese government), at least seven Chinese firms are expected to provide eVTOL cars by the year 2026. Guangdong Province opened China's first flying car testing center in March.

Xpeng is a key partner in VW's China turnaround plan for the EV market. It has begun to deliver its own flying vehicle: a futuristic, extended-range EV or "mothership", built to launch a drone with two passengers from its cargo bay. In recent years, the eVTOL industry has seen many failures, as startups in Europe and America have filed for bankruptcy before launching a vehicle into commercial operation. The flying car concept has not been a sustainable business.

'ESTABLISHED LIFESTYLE ENJOYERS"

Volkswagen's original goal was to build a V.MO full-scale model in two years. VW's planning materials target wealthy Chinese individuals who are looking for exclusivity and status. Marketing and product plans indicate that the cabin would have to be big enough to accommodate four passengers with their luggage and include screens for entertainment.

The team consisted of fewer than ten members, led by Zhou (the 39-year old director of Volkswagen Beijing's innovation center). VW promoted the team in press releases and videos as a "young Chinese expert" who had "started at scratch." VW concluded that it needed a Chinese partnership because its local market "was ahead of European R&D," Zhou stated in a promotional film.

VW was unable to find a partner who could offer technical capabilities without the political risk associated with government ties, which one internal presentation warned would "trigger scrutiny beyond China."

Volkswagen considered working with EHang based in Guangzhou, China's only eVTOL startup that has listed shares. VW concluded that the company had a gap to close in order to meet VW standards for automotive engineering, according to an internal assessment from August 2020. EHang did not respond to a comment request.

Sichuan Tengden, a Chinese manufacturer of military drones, also resigned from consideration. The company cited "capacity constraints" that an internal VW memo linked to the “China-U.S. Arms Race." Tengden did not respond to a comment request.

VW's legal department also highlighted another risk associated with working with the firm: its role as a supplier of military equipment. Tengden is founded by a former employee of Aviation Industry Corporation of China, a state-run defence contractor that has been targeted by U.S. restrictions on trade because of its role developing killer drones. AVIC is the manufacturer of China's J-20 Stealth Fighter, as well as other major weapons.

Records reviewed by us show that VW instead approved a contract for AVIC General Huanan Aircraft Industry Company, AVIC GA, to provide consulting services on its flying vehicle. When the arrangement was signed in 2021, AVIC faced U.S. Export restrictions but wasn't a completely blocked entity.

AVIC did not respond to any questions regarding its involvement.

STAR WARS VIRTUALITY, "UNCONTROLABLE" RISKS

VW chose Pantuo Aviation - a Shanghai-based startup that had been operating for two years - to carry out a feasibility report on a flying luxury car that would bear the VW badge. Pantuo Aviation was owned by Zhang Qiong. Zhang Qiong is a Chinese entrepreneur with a successful business in supplying aviation fuel to private planes.

Two people have said that the design of the startup - an elegant craft with rotating wings – impressed Volkswagen managers. Pantala was a sleek craft that looked more like an aircraft than a Star Wars vessel.

Zhang Pantuo thought VW's team was full of imagination, but had no plan concrete for the future. She said, "At first they had absolutely nothing." They had never done it before.

Zhang said that VW approached the project with a traditional auto mindset. Zhang felt that while Pantuo viewed itself as developing an innovative, complex aircraft that required tolerance for uncertainty and step-by-step design, the automaker approached the project as a simple assembly project.

She said, "They appeared to think that it should be similar to assembling a vehicle - all the pieces are there and you can just put them together." VW has not commented on Zhang's story.

A person involved in the project said that VW had returned to Pantuo at one point to inform them that its focus group found potential V.MO drivers were uncomfortable with boarding or disembarking near to the rotating blades of their vehicle. The person involved said that the automaker asked for a redesign of the rotors to protect them 60 days prior to the project deadline.

VW and AVIC GA evaluated Pantuo’s design, finding it to be "uncontrollable." VW's project status document from September 2021 states that the concept did not show "convincing viability" because of poor aerodynamic performance, which left the projected range far below the target. The technical teams warned that the vehicle could not be made lighter enough.

In the same report, Pantuo's collaboration was called a "mistake." The VW team was blamed for not having "in-house experience in aviation" and Pantuo's "too ambitious design" had a "limited budget and development period."

VW decided that the project would need to be re-drawn.

VW's presentation stated that the automaker had offered to cancel the contract worth $590,000. This would cost about $414,000. Pantuo, however, refused to accept the offer. Pantuo argued that Volkswagen shared incorrect concept details with AVIC GA in a subsequent arbitration.

The arbitrator found in favor of VW and ordered Pantuo, Inc. to pay damages and costs totaling more than $120,000. VW's legal department hailed the ruling in an email as "an outstanding outcome". The arbitration commission did not respond to our request for a comment.

The matter was not over. According to Zhang and other witnesses, Shanghai Police opened an investigation in late 2015 into a criminal case that Pantuo filed against VW 2021, for alleged violation of trade secrets.

The automaker's internal correspondence from December 2023, reviewed by reveals that it regarded the criminal complaint against Pantuo as "baseless". It also viewed the tactic as a way to exert pressure on Pantuo for a favorable settlement in civil litigation.

The dispute escalated in September 2025, when Pantuo filed a $30 million lawsuit in a Guangdong court against VW and AVIC GA for intellectual-property theft. Pantuo alleged that Volkswagen, by sharing its designs and research with AVIC, had transferred the startup's intellectual property to an entity they considered an established rival.

AVIC did not respond to any questions regarding Pantuo's lawsuit against its unit. Shanghai police and Guangdong Court did not respond to requests for comments.

China's Supreme People's Court dismissed Pantuo's suit against Volkswagen in June, saying that the claim should have resolved through arbitration. The ruling allowed the suit to continue against AVIC GA and left the possibility open that Pantuo might return to the arbitrator to present its VW claim.

Zhang, now based out of Singapore, said she would be evaluating her legal options.

The shoe on the other foot

Some market observers say that VW's dispute against Pantuo is indicative of a wider shift in the way Western companies operate in China.

Since decades, foreign firms entering the Chinese marketplace have been worried that local partners will copy technology and pass it on to other domestic players.

Chinese firms are more likely to defend novel technologies developed by them, especially in areas where the government has set national priorities like the low altitude economy.

Mark Cohen, a former senior IP attache with the U.S. Embassy in Beijing, said: "The shoe is on the opposite foot." China will become more litigious as it acquires more desirable technology.

Businesses and law firms report that Chinese prosecutors are becoming more aggressive when it comes to pursuing cases of intellectual property, particularly in areas identified as national priority. The national agency overseeing prosecutions announced in February that it would be stepping up enforcement of IP theft claims due to "intensifying risks of technology leakage".

Chinese courts accepted 11,066 intellectual-property cases involving foreign parties in 2025, up 34% from 2024, according to a report by the Supreme People's Court. These figures do not indicate how many cases involved Chinese plaintiffs. The court reported in April that the number of foreign-related cases handled by the Intellectual Property Court of China grew at a rate of 19% per year between 2019 and 2025. This equates to 2,546 cases or one-tenth the total.

China's State council?Information office referred 'questions about flying-car developments and IP legal questions to the National Development and Reform Commission (the country's leading economic planner). The National Development and Reform Commission did not respond.

'FLYING TIGER'

VW partnered with Hunan, a manufacturer of drones, light aircraft, and flying cars, in 2022. The partnership developed the first full-scale model, dubbed "Flying Tiger" after the Chinese zodiac year.

The Flying Tiger's basic configuration was eight rotors to lift the aircraft and two for forward flight.

VW and Sunward developed two full-scale prototypes on the basis of that?model. The "Sky Garden" model, which featured a luxurious, spacious cabin, was the showcase for this project. The mock-up was occupied by the Chinese Premier Li Qiang in March 2023. This served as a sign of approval for the project, which aligned with China's increasing ambitions within the sector. Sunward did not respond to any questions regarding its involvement.

The model was sent to Volkswagen's Wolfsburg headquarters for a review of the project by Arno Antlitz, CFO, and CEO Oliver Blume. Antlitz encouraged the team to move forward, citing a need to learn from made-in China efforts.

The people reported that a third prototype was tested in Inner Mongolia at remote sites where engineers lived in and converted shipping containers.

VW will launch its new car in October 2023. Wanfeng Auto Holding Group, which already has a well-established aviation division, is helping VW prepare. Wanfeng is a Chinese car wheel manufacturer that acquired Austrian aerospace company Diamond Aircraft.

Volkswagen's top management committee for group operations held a meeting in March 2024 to discuss the possibility of bringing the flying cars to market. The legal, compliance, financial and strategy teams expressed concerns. One risk was the long time to profitability. Competitiveness was another risk. VW's strategy paper warned that "established Chinese players have already captured the momentum in China," naming rival automakers such as Xpeng, and Geely.

Ralf Brandstaetter, VW's China director, was the one who made the final decision.

Brandstaetter decided that VW had to concentrate on its core business, at a moment when passenger car sales were declining. Two people said that he killed the project by telling the team in June 2024 that it had been disbanded. According to documents, he broke the news in a WeChat Message to Wanfeng. The Chinese partner.

Brandstaetter did not respond to any questions regarding the decision to abandon the flying car, which was later confirmed by the board at VW China.

Wanfeng did not respond to the request for comment either. In a regulatory filing from November 2024, one of its units stated that the joint venture agreement with VW was over.

The COPS Investigate

After the failure of Volkswagen's flying car project, Zhou's legal troubles continued.

Documents in the case show that when the criminal investigation into an alleged violation of trade secrets began in December 2023 the police identified Zhou as the suspect - and not VW. Shanghai prosecutors began investigating the case in 2024.

Zhang, Pantuo, claimed that she filed her criminal complaint not against Zhou but VW.

Zhou was subjected to travel restrictions while the investigation proceeded. This is according to records from police that were seen by. She called it "shocking" and "heartbreaking" that Volkswagen treated the case against Zhou as an individual matter. Top executives told her this just a month ago.

The criminal investigation was not addressed in the Supreme People's Court's decision of June on the civil case. Shanghai prosecutors did not respond to an inquiry about the case of Zhou.

During the ongoing dispute over the flying cars, Wanfeng - the company VW once selected to bring its vehicle to the market - swooped into the fray to rescue German aerospace startup Volocopter from bankruptcy. Reporting by Ju-min Park in Beijing and Kevin Krolicki, Zhang Yan in Shanghai, and Claire Fu from Singapore. Kevin Krolicki, David Dolan and Kevin Krolicki wrote the article. (Editing by Brian Thevenot, David Crawshaw and David Thevenot.)

(source: Reuters)