Volkswagen is trying to move driver assistance beyond the limited middle ground of Level 2 systems, where the car helps but still leaves the human fully responsible. To make the jump to genuine hands-off capability, the German automaker is betting heavily on China’s complex roads, local partners, and faster regulatory momentum.
Volkswagen Group China has received a public road testing permit for Level 3 autonomous driving in Hefei, the capital of Anhui province, and real-world trials have already begun. The approval also allows Volkswagen to collect large amounts of driving data across the city’s complicated road network. While road-testing permits are increasingly common in the autonomous driving industry, this one is especially important for Volkswagen’s plan to make Level 3 production-ready in China by the second half of 2027. Hefei is a key location for the company because it houses the Volkswagen China Technology Company (VCTC), Volkswagen’s largest development center outside Germany, along with the Volkswagen Anhui electric vehicle production base.
The autonomous driving technology in Volkswagen’s test fleet is supplied by CARIZON, an intelligent driving venture created between Volkswagen software company CARIAD and Chinese hardware firm Horizon Robotics. The system is known as Hyper Sense 8, or HS8, and is designed as a full-scenario driving assistance platform. It is powered by GAIA 2.0, an internal world model that Volkswagen says can run safety simulations equivalent to 3,110,000 miles of driving every day using around 30 million scenario recordings. The company aims to double that figure to 6,200,000 miles daily. To manage this enormous data workload, the team is also developing a custom system-on-chip called C7H, which engineers say can eventually support Level 4 autonomy.
The shift from Level 2 to Level 3 is not just a technical upgrade. It also changes who is legally responsible when the system is driving. With Level 2 systems, including Tesla’s controversially named Full Self-Driving suite, the driver remains legally in charge at all times. With Level 3, however, the manufacturer accepts liability while the system is active. If the car fails to detect a stationary truck or misjudges a concrete barrier, the responsibility falls on the automaker rather than the driver. That transfer of legal risk helps explain why so few carmakers have pursued certified Level 3 systems and why Mercedes-Benz has put its flagship Drive Pilot system back on the shelf.
Volkswagen is not entering this space unchallenged. Chinese competitors are already moving quickly. In December 2025, China’s Ministry of Industry and Information Technology issued the country’s first official Level 3 product approvals to two vehicles. One was a Changan model restricted to 31 mph on designated motorways in Chongqing, while the other was a BAIC Arcfox sedan approved to operate at up to 50 mph on three specific expressways in Beijing. GAC’s premium Hyptec brand and XPeng have also built up testing mileage under their own regional permits.
The true challenge of Level 3 is not simply maintaining speed or staying within a lane. It is handling the unpredictable moments that happen constantly in real traffic. Many driver assistance systems still behave nervously, braking too sharply when lanes merge or hesitating at roundabouts. A certified Level 3 system operating in busy Hefei must be able to read merging traffic smoothly, apply throttle and brakes naturally, complete lane changes comfortably, and manage poor weather without immediately alerting the driver to take over.
This project also marks a significant retreat from Volkswagen’s earlier software ambitions. The company once hoped to build one universal software platform for every brand in the group, but that strategy resulted in delays, postponed vehicle launches, and serious internal consequences. By partnering with Horizon Robotics and buying a 5% stake in XPeng to jointly develop the China Electrical Architecture (CEA), Volkswagen is effectively admitting that it cannot create successful software solutions solely from headquarters in Lower Saxony.
There is still debate inside the industry over whether Level 3 is worth the difficulty at all. Tesla’s Elon Musk, along with several autonomous driving leaders at Chinese startups, has argued that Level 3 is a dangerous distraction. Their concern is that asking a distracted driver to retake control within about three seconds during an emergency is unsafe, and that the industry should skip directly to Level 4 robotaxis. Volkswagen’s leadership, however, is choosing a slower but more incremental path. By accepting the legal responsibility that comes with Level 3, Volkswagen is betting that many customers will continue to prefer owning a personal car rather than relying on a driverless taxi service.
