WOLFSBURG, Germany — Volkswagen AG on Tuesday unveiled plans to invest approximately €20 billion over the next decade in a network of battery gigafactories across Southeast Asia, marking the company's most aggressive push yet to compete with Chinese electric vehicle manufacturers in the world's fastest-growing automotive markets.

Chief Executive Oliver Blume announced the initiative at a press conference in Wolfsburg, confirming that the first two facilities will be built in Indonesia's Central Java province and Vietnam's Haiphong economic zone, with construction beginning in late 2026. A third site in Thailand is under advanced negotiation. The factories will produce lithium iron phosphate (LFP) battery cells and complete battery packs designed for affordable EV models priced under €20,000, a segment where Volkswagen has struggled against BYD, SAIC, and other Chinese competitors.

The announcement follows months of difficult restructuring at Volkswagen's European operations, where the company reached a painful agreement with labor unions in late 2025 to reduce headcount at several German plants. Blume framed the Southeast Asian investment as complementary rather than a replacement for European manufacturing. "This is about growth in markets where 700 million consumers are on the verge of their first car purchase," he said. "If we are not there with the right product at the right price, someone else will be."

Indonesia's Minister of Investment hailed the deal as a landmark for the country's ambition to become a global EV supply chain hub, leveraging its vast nickel reserves. The Indonesian government has reportedly offered significant tax incentives and expedited permitting. Vietnam's government similarly confirmed preferential terms through its foreign direct investment framework, building on the country's success in attracting electronics manufacturing from Samsung and Apple suppliers.

Analysts at Deutsche Bank and UBS responded positively, with both firms upgrading Volkswagen's stock to "buy" in early trading on the Frankfurt exchange. VW shares rose 6.2% by midday. "This is the clearest signal yet that Volkswagen understands the battlefield has shifted," wrote UBS analyst Patrick Hummel. "The economics of battery production in Southeast Asia, combined with proximity to critical mineral supply chains, could finally give VW a cost structure competitive with Chinese OEMs."

The move is expected to intensify a broader geopolitical competition over EV supply chains in the region, where Chinese manufacturers have already established significant footholds. CATL operates a major cell plant in Indonesia, and BYD has broken ground on an assembly facility in Thailand. European and American policymakers have increasingly encouraged Western automakers to diversify production away from China, and Volkswagen's announcement may pressure rivals including Stellantis and Toyota to accelerate their own regional strategies.