German carmaker Volkswagen said on Tuesday it would invest one billion euros in a new development centre for electric vehicles in China, as the EV market proved a key battlefield for brands at the Shanghai Auto Show.

"The company is investing around EUR 1 billion in a new state-of-the-art development, innovation, and procurement centre for fully connected intelligent electric vehicles in the southern Chinese city of Hefei," the group said in a news release.

EVs now make up one out of four car sales in China, the world's largest car market, and dozens of new models from domestic and Western brands were unveiled at the auto show, the first since the end of China's Covid restrictions.

Local brands command 81 percent of the EV market in China, according to analysts at Counterpoint Research, and industry titans like Volkswagen are racing to catch up.

Executive Ralf Brandstaetter said the move was a key step in the group's "in China, for China" strategy.

The new venture, called "100%TechCo", will be launched in 2024, and will be made up of more than 2,000 employees working in procurement and research and development.

"The aim is to align the Group's vehicles even more quickly with the wishes of Chinese customers and to achieve shorter time to market," the news statement said.

It said it expected development times to be shortened by 30 percent.

The CEO will be Marcus Hafkemeyer, Chief Technology Officer of Volkswagen Group China. (AFP)