The German manufacturer envisioned a battery-powered flying vehicle designed for China’s emerging low-altitude economy. To make that vision real, Volkswagen turned to Chinese design and technology, which was beginning to move faster than its own.

The company created an internal startup team in Beijing to develop a flying car — a challenge that had already tested its Porsche and Audi divisions. The goal was to build a “luxury futuristic” drone capable of carrying four wealthy passengers between cities such as Beijing and Tianjin in a quiet aircraft with noise levels half those of a helicopter.

“Looking ahead, we see this as having strong potential to become a key market segment for Volkswagen Group,” VW project lead Zhou Jin said in a 2022 video posted on the company’s website.

But while Chinese companies moved closer to launching flying-car services, Volkswagen’s project remained on the ground.

The effort failed to match the speed of China’s low-altitude economy — a growing aviation sector covering drones, air taxis and other services operating below 1,000 meters. Chinese competitors, local governments and supply chains advanced faster than Volkswagen, whose global operations were built around slower development cycles, compliance systems and traditional automotive engineering.

The setback became another example of established foreign automakers struggling against rapidly advancing Chinese competitors.

“If you’re not local enough, if you’re not faster or as fast as the Chinese, you don’t stand a chance,” said Emerson Xu, CEO of consultancy NexAvian and former China head of air-taxi maker Volocopter.

The collapse of Volkswagen’s flying-car project also exposed changing legal risks for foreign companies operating in China. While Western firms have long accused Chinese companies of intellectual property theft, Volkswagen became involved in a five-year legal dispute after Chinese partner Pantuo Aviation accused the automaker of infringing trade secrets related to flying-car development.

A related criminal investigation targeted Zhou, the Chinese executive Volkswagen had promoted as the public face of its innovation effort.

Volkswagen declined to comment publicly on its flying-car development or the case involving Zhou. The company said it believed the claims against it were “entirely without substance.”

“I really can’t wrap my head around why I have been left alone to face a criminal case I was innocently dragged into, just by carrying out my work duties,” Zhou told Reuters.

She said she had repeatedly asked Volkswagen to actively resolve the commercial dispute but declined to discuss details of the investigation, saying the matter was for Volkswagen to address.

The story of Volkswagen’s attempt to develop and later abandon a flying car in 2024 has not previously been reported.

Reuters reviewed hundreds of pages of Volkswagen documents, including planning papers, legal records and internal communications. Reporters also examined disclosures from former partners and interviewed five people familiar with the project.

Volkswagen continues to work with Chinese companies, including electric-vehicle maker Xpeng and autonomous-driving technology firm Horizon Robotics, as it seeks to regain ground in the world’s largest auto market.

The company’s decline in China has been severe. Volkswagen deliveries in the country peaked at 4.2 million vehicles in 2019 but dropped to 2.7 million last year, pushing the company behind Chinese rivals BYD and Geely.

The downturn has pressured Volkswagen’s profits as it also faces US tariff costs and difficulties restructuring its German manufacturing operations. The company recently announced plans to reduce vehicle models and cut up to 100,000 jobs.

Early mover, then overtaken

In the late 2010s, Volkswagen joined a global race among automakers to develop electric vertical takeoff and landing aircraft, commonly known as eVTOLs.

The idea was straightforward: electric flying vehicles could reduce travel times in crowded cities while helping automakers transform into technology-focused mobility companies.

Toyota invested in Joby Aviation, while Porsche Consulting estimated the urban air mobility industry could become worth $32 billion by 2035. Volkswagen’s Porsche brand partnered with Boeing, while Audi worked with Airbus on flying-car concepts.

Neither project produced a commercial vehicle, leaving Volkswagen executives to focus on China — a market where the company was still dominant.

When Volkswagen launched its China flying-car project in 2019, the industry was relatively open. By the time the company ended the effort in 2024, competition had intensified.

China had elevated the low-altitude economy into a national strategic priority, encouraging domestic companies to enter the field. At least seven Chinese companies are expected to offer eVTOL vehicles by the end of 2026, according to CCID Consulting, a Chinese state-affiliated think tank.

In March, China opened its first national flying-car testing centre in Guangdong province.

Volkswagen partner Xpeng, which is helping the German automaker expand in electric vehicles, is also developing its own flying vehicle: an extended-range electric truck capable of launching a two-passenger drone from its cargo area.

The wider eVTOL sector, however, has struggled globally. Several startups in the United States and Europe have collapsed before achieving large-scale commercial operations, and no company has yet created a sustainable flying-car business.

A luxury vehicle for China’s wealthy

Volkswagen initially planned to build a full-scale prototype called V.MO within two years.

Internal planning documents described the target customers as China’s “established life enjoyers” — wealthy consumers seeking status and exclusivity.

The vehicle was designed to carry four passengers and luggage, with screens inside the cabin to provide entertainment.

The startup team was small, with fewer than 10 members led by Zhou, then the 39-year-old director of Volkswagen’s Beijing innovation centre.

Volkswagen promoted the group as a “young team of Chinese experts” that had “started from scratch.”

The company concluded it needed a Chinese partner because the local market was “ahead of European R&D,” Zhou said in a promotional video.

However, Volkswagen struggled to find a partner with advanced technology while avoiding political risks linked to government connections.

The company explored working with Guangzhou-based eVTOL developer EHang but concluded the company still had a gap to meet Volkswagen’s automotive engineering standards.

Volkswagen also considered Chinese drone manufacturer Sichuan Tengden but abandoned the possibility after concerns over capacity and links to China’s military sector.

Instead, Volkswagen hired AVIC General Huanan Aircraft Industry Company, an aviation subsidiary linked to state-owned defence contractor AVIC, for consulting work.

The Star Wars-like aircraft

By 2021, Volkswagen selected Shanghai-based startup Pantuo Aviation to conduct a feasibility study for a luxury flying vehicle carrying a Volkswagen badge.

Pantuo’s design featured four rotating wings and resembled a futuristic spacecraft. Two people familiar with the project said the concept impressed Volkswagen managers.

Pantuo founder Zhang Qiong said Volkswagen’s team had creativity but lacked practical aviation experience.

“At the very beginning, they really had nothing,” Zhang said.

She said Volkswagen approached the project with a traditional automotive mindset, treating the aircraft like a vehicle assembly project rather than a complex aviation development challenge.

“They seemed to think it should be like assembling a car — where all the parts exist and you just put them together,” Zhang said.

Volkswagen did not comment on Zhang’s account.

Internal evaluations later found major technical problems with Pantuo’s design. Volkswagen and AVIC GA concluded the concept carried “uncontrollable risk.”

A September 2021 Volkswagen assessment said the aircraft lacked convincing feasibility because of poor aerodynamic performance, limited range and concerns over weight.

The company described the cooperation with Pantuo as a “mistake” and blamed both limited aviation experience inside Volkswagen and an overly ambitious design.

Volkswagen returned the project to the drawing board.

From “Flying Tiger” to cancellation

In 2022, Volkswagen partnered with Hunan Sunward Technology, a company producing drones and light aircraft.

Together they developed a prototype called the “Flying Tiger.”

The aircraft used eight rotors for lift and two for forward movement. Volkswagen and Sunward later created additional prototypes, including “Sky Garden,” a luxury version that became the project’s showcase model.

In March 2023, Chinese Premier Li Qiang sat inside the mock-up, highlighting the project’s connection with China’s ambitions in the sector.

The model was later transported to Volkswagen headquarters in Wolfsburg, Germany, where executives including CEO Oliver Blume and CFO Arno Antlitz reviewed the project.

Antlitz encouraged the team to continue, citing the need to learn from China’s rapid innovation pace, according to people familiar with the meeting.

A prototype was tested in Inner Mongolia, where engineers worked from converted shipping containers.

In October 2023, Volkswagen partnered with Wanfeng Auto Holding Group, which had experience in aviation, to prepare for commercialisation.

But by March 2024, Volkswagen executives raised concerns about profitability, competitiveness and China’s rapidly advancing domestic players.

A company strategy document warned that momentum in China’s flying-car industry had already been captured by companies including Xpeng and Geely.

Although management approved moving forward, the final decision rested with Volkswagen China chief Ralf Brandstaetter.

He decided the company needed to focus on its struggling core automotive business.

In June 2024, Brandstaetter ended the flying-car project and disbanded the team, according to people involved.

He informed Wanfeng through a WeChat message, documents reviewed by Reuters showed.

Legal battle continues

The project’s end did not end the legal problems.

After Pantuo filed a criminal complaint over alleged trade-secret violations in 2021, Shanghai police opened an investigation in 2023.

Zhou was named as the suspect rather than Volkswagen, according to case documents.

Zhang said she had filed the complaint against Volkswagen, not Zhou.

Zhou said she had been left to deal with the case alone despite carrying out her duties for the company.

The dispute also moved into civil courts. In 2025, Pantuo filed a $30 million lawsuit against Volkswagen and AVIC GA, accusing them of intellectual-property theft.

China’s Supreme People’s Court later dismissed the case against Volkswagen, saying the dispute should have been handled through arbitration. The claim against AVIC GA was allowed to continue.

The case reflects a broader shift in China’s technology environment, where domestic companies are increasingly defending their own intellectual property.

“The shoe is on the other foot,” said Mark Cohen, a former US intellectual property attaché in Beijing.

As Chinese companies develop more advanced technology, he said, they are increasingly becoming plaintiffs rather than defendants.

While Volkswagen abandoned its flying-car ambitions, Wanfeng — the company it once selected to help bring the vehicle to market — later acquired German aerospace startup Volocopter after it entered bankruptcy.