After years as China's top-selling automaker, Volkswagen in 2019 was looking beyond the roads it dominated and set out to own a piece of the sky.
VW had a vision for a battery-powered airborne vehicle. To turn it into reality, the then-82-year-old manufacturer sought Chinese design and technology that was beginning to outpace its own.
The German automaker’s goal was to move fast with an in-house startup team in Beijing to produce a flying car — a moonshot challenge that had stumped its Porsche and Audi divisions. In China, for China, VW would deliver what it described internally as a “luxury futuristic” drone that would convey four wealthy passengers in style. The aim was to sell them a vehicle to fly between cities like Beijing and Tianjin in a quiet craft with noise levels half those of a helicopter.
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"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 now, while local upstarts prepare for flying-car liftoff in China, Volkswagen remains grounded.
Volkswagen's flying-car effort couldn’t match the speed of China’s low-altitude economy. That's the aviation industry’s term for an emerging market encompassing drones, air taxis and other aviation services aimed at the airspace below 1,000 meters. In China, local rivals, governments and supply chains have moved faster than VW, a legacy giant with a culture of deliberation and compliance safeguards. VW’s stumble serves as another example of older automakers rapidly losing business to 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.
Emerson Xu, CEO of consultancy NexAvian
The failed project also spotlights shifting legal risks for foreign companies in China. While Western businesses have long accused Chinese firms of stealing technology, VW has faced a five-year legal battle against allegations by a Chinese partner that it infringed on trade secrets in flying-car development. And there is a related criminal probe into Zhou — the Chinese manager whom VW had promoted as the face of its innovation.
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Volkswagen's experience also shows how "brutally selective" China’s mobility industry has become, said Emerson Xu, CEO of consultancy NexAvian and former China head of air-taxi maker Volocopter. “If you're not local enough, if you're not faster or as fast as the Chinese, you don't stand a chance.”
A Volkswagen spokesperson said the automaker wouldn’t comment publicly about its flying-car development or the case against its employee, Zhou. “We are, however, convinced that the claims brought against us are entirely without substance,” the spokesperson said.
“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. “I have been repeatedly pleading with the company to step in and actively resolve this commercial dispute in full.” She declined to discuss the probe’s specifics “for now,” saying the matter is for VW to address.
The story of Volkswagen’s struggle to bring a flying car to market and how it came to kill the project in 2024 hasn’t been previously reported.
For this report, Reuters reviewed hundreds of pages of Volkswagen documents on its flying-car ambitions, including legal records, planning papers and corporate communications. Reporters also reviewed disclosures about flying-car development by former VW partners and interviewed five people with knowledge of the project.
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VW continues to partner with Chinese firms, including automaker Xpeng for help with electric vehicles and Horizon Robotics with autonomous driving. It has pursued such arrangements as it has lost sales and market share to Chinese-brand rivals in the world’s largest car market.
The decline has been steep: VW’s deliveries in China peaked at 4.2 million in 2019 but fell to 2.7 million last year, relegating the automaker to third place behind local rivals BYD and Geely. Those struggles have hammered profits at VW, which is also reeling from U.S. tariff costs and mounting pressure on its German manufacturing network. The company in recent weeks announced plans to slash vehicle models and cut up to 100,000 jobs as it scrambles to stabilize the business.
EARLY, THEN OVERTAKEN
In the late 2010s, Volkswagen joined a rush by automakers into electric vertical takeoff and landing (eVTOL) technology. Auto manufacturers often use “flying car” as a catch-all term, along with eVTOL, for the emerging sector.
The idea was simple: Electric flying cars could cut travel times in congested cities and help car makers reinvent themselves as high-tech “mobility companies” for investors.
Joby’s air taxi takes off from John F. Kennedy airport in New York in April. Some automakers have developed flying-car technology, but no company has yet made the concept a durable business. REUTERS/David 'Dee' Delgado
Toyota, for example, bet on “urban air mobility” with an investment in Joby Aviation, a startup that recently tested air taxis in New York.
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Porsche Consulting, a VW management-consulting arm, promoted an industry it estimated could be worth $32 billion by 2035. VW’s Porsche brand tied up with U.S. aircraft giant Boeing while sister brand Audi partnered with Europe’s Airbus on flying-car projects. Neither venture developed a commercial product, leaving Volkswagen executives to turn their attention to the auto market they then dominated: China.
When VW launched its China project in 2019, the flying-car market was relatively open. By the time it shut down in 2024, the race had tightened dramatically. In those five years, China's government elevated the "low-altitude economy" to a national strategic priority, bringing in a throng of local competitors.
In March, China’s first national testing center for flying cars opened in Guangdong, spanning an area more than half the size of Manhattan. Chinese state-media outlet CGTN posted details about the facility on Facebook.
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’s first national testing center for flying cars opened in Guangdong province.
Xpeng, a crucial partner for VW’s China turnaround strategy in the EV market, is moving toward delivery of its own flying car: a futuristic extended-range EV truck or “mothership” built to launch a two-passenger drone from its cargo bay.
The eVTOL sector, however, has been littered with casualties in recent years, with startups across the United States and Europe filing for bankruptcy before bringing a vehicle to sustained commercial operation. No company has made the flying-car concept a durable business.
China's Xpeng has developed a futuristic truck that can launch a two-person drone from its cargo bay, as shown in a promotional video that the automaker's flying-car subsidiary, Aridge, posted on YouTube. At least seven Chinese companies are expected to offer eVTOL vehicles by the end of 2026, according to CCID Consulting.
‘ESTABLISHED LIFE ENJOYERS’
Volkswagen's initial aim was to build a full-scale prototype dubbed V.MO in about two years. Planning materials seen by Reuters target what VW called China’s "established life enjoyers" — wealthy individuals seeking status and exclusivity. The cabin had to be large enough for four passengers and their luggage, and would include screens to keep them entertained, marketing and product plans show.
The startup team was tiny — fewer than 10 members led by Zhou, the 39-year-old director of Volkswagen’s Beijing innovation center. VW promoted them in videos and press releases as a “young team of Chinese experts” that had “started from scratch.” VW also concluded it needed a Chinese partner because the local market was "ahead of European R&D,” Zhou said in a promotional video.
VW project lead Zhou Jin, as seen in a screengrab from a 2022 promotional video posted on the company's website. The 39-year-old Chinese national faces a criminal probe for alleged trade-secret infringement in flying-car development. She declined to discuss the probe's specifics "for now," saying the matter is for VW to address.
Yet VW struggled to find a partner that offered technical capability without the political risk of government ties that one internal presentation warned could "trigger scrutiny outside China.”
Volkswagen explored working with Guangzhou-based EHang, China’s first eVTOL startup to list shares. VW concluded the firm had a “gap” to close to meet VW’s automotive engineering standards, an internal assessment dated August 2020 said. EHang didn’t respond to a request for comment.
Chinese military drone-maker Sichuan Tengden withdrew from consideration, too. It cited capacity constraints that an internal VW note linked to the "China-U.S. arms race." Tengden didn’t respond to a request for comment.
VW’s legal team also flagged another risk about working with the company: Its role as a military supplier. Tengden was founded by a veteran of Aviation Industry Corporation of China (AVIC) – a state-run defense contractor targeted by U.S. trade restrictions because of its role in developing killer drones and stealth fighters. AVIC builds China’s J-20 stealth fighter, among other major weapons.
Instead, VW approved a more-limited contract to hire an AVIC subsidiary, AVIC General Huanan Aircraft Industry Company (AVIC GA), for consultancy on its flying car, records reviewed by Reuters show. In 2021, when the arrangement began, AVIC faced U.S. export restrictions, but it wasn’t a fully blocked entity under U.S. sanctions.
AVIC didn’t respond to questions about its involvement.
STARS WARS VISIONS, ‘UNCONTROLLABLE’ RISKS
By that year, VW had chosen a two-year-old Shanghai-based startup, Pantuo Aviation, to conduct a feasibility study for a flying luxury vehicle that would carry a VW badge. Pantuo was run by Zhang Qiong, a Chinese entrepreneur who had built a business supplying aviation fuel for private planes in China.
The startup’s design – a sleek craft with four rotating wings – wowed Volkswagen managers, two people said. Known as Pantala, it looked more like a Star Wars ship than a conventional aircraft.
Pantuo’s Zhang thought VW’s team had plenty of imagination but no concrete plan for the work ahead. “At the very beginning, they really had nothing,” she said. “They had never done this before."
Pantuo Aviation came up with a flying-car concept known as Pantala, as seen in a video on the company's website. While the Shanghai startup's Star Wars-like design impressed Volkswagen, the partnership between the two firms became strained.
VW approached the initiative with a traditional automotive mindset, according to Zhang. While Pantuo saw itself as developing a complex, novel aircraft that required step-by-step engineering and tolerance for uncertainty, she felt the automaker treated the venture as a straightforward assembly project.
“They seemed to think it should be like assembling a car – where all the parts exist and you just put them together,” she said. VW had no comment on Zhang’s account.
At one point, VW came back to Pantuo to say its focus group had found potential V.MO owners were uncomfortable about boarding or disembarking close to the vehicle’s rotating blades, according to a person involved. The automaker requested a redesign to shield the rotors 60 days before the project’s deadline, the person said.
Evaluations by VW and AVIC GA found Pantuo’s design carried "uncontrollable risk." According to a VW project status document dated September 2021, the concept failed to show "convincing feasibility" due to poor aerodynamic performance that left the projected range "far below the target." Technical teams also flagged a “high risk” the vehicle couldn’t be made light enough.
The same assessment termed the collaboration with Pantuo a "mistake." It blamed the VW team's lack of "in-house aviation experience" and said Pantuo’s design had been "too ambitious" with a "limited development period and budget."
VW concluded the project needed to return to the drawing board.
The automaker offered to terminate the roughly $590,000 contract for about $414,000, according to the VW presentation. But Pantuo refused, arguing at a subsequent arbitration proceeding that Volkswagen had improperly shared concept details with AVIC GA.
In April 2023, the arbitrator ruled for VW, ordering Pantuo to pay damages and fees of more than $120,000. VW’s legal team celebrated that ruling as “an outstanding result” in an internal email. The arbitration commission didn’t respond to a request for comment.
But the matter wasn’t over. Later that year, Shanghai police opened an investigation into a criminal complaint that Pantuo had filed against VW in 2021 for alleged infringement of trade secrets, according to Zhang and two other people.
Internal Volkswagen correspondence dated December 2023 reviewed by Reuters shows the automaker regarded the criminal complaint as “baseless” – and viewed it as a pressure tactic to secure a favorable settlement for Pantuo in future 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 claimed that by sharing its designs with the AVIC unit, Volkswagen had given the startup’s proprietary research to an entity it considered an established competitor.
AVIC didn’t respond to questions about Pantuo’s suit against its unit. The Shanghai police and Guangdong court didn’t respond to requests for comment.
China's Supreme People’s Court in June dismissed Pantuo's lawsuit against Volkswagen, saying the claim should have been resolved through arbitration. The ruling allowed the suit against AVIC GA to proceed and left open the possibility that Pantuo could return to the arbitrator with its claim against VW.
After the decision, Zhang, who is now based in Singapore, told Reuters she was considering her legal options.
THE SHOE ON THE OTHER FOOT
VW’s dispute with Pantuo reflects a broader shift for Western companies operating in China, some market watchers say.
For decades, the dominant anxiety ran in one direction: Foreign firms entering the Chinese market worried about local partners copying technology and passing it to other domestic players.
As Chinese firms develop novel technology — particularly in areas the government has designated national priorities, like the low-altitude economy — they are more willing to defend it.
“The shoe is on the other foot,“ said Mark Cohen, former senior IP attache at the U.S. embassy in Beijing. As China owns more desirable tech, it “will become a plaintiff more and more.“
Chinese prosecutors have become more aggressive in pursuing intellectual property cases, especially in fields identified as national priorities, businesses and law firms say. In February, the national agency that oversees prosecutions said it was stepping up enforcement on claims of IP theft because of “intensifying and multi-dimensional 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. The figures don’t indicate the proportion that involved Chinese plaintiffs. Foreign-related matters handled by China’s Intellectual Property Court grew at an average annual rate of 19% between 2019 and 2025, reaching 2,546 cases, or about one-tenth of the total, the court said in April.
China’s State Council Information Office referred Reuters’ queries about flying-car development and IP legal issues to the National Development and Reform Commission, the country’s top economic planner. The commission didn’t respond.
‘FLYING TIGER’
By 2022, VW had enlisted a new flying-car partner, Hunan Sunward Technology, a maker of drones and light aircraft. The partnership first developed a full-scale prototype dubbed the "Flying Tiger," after the year in the Chinese zodiac.
With eight rotors for lift and two for forward flight, the Flying Tiger set the basic configuration for the project's next phase.
Workers assemble one of the "Flying Tiger" prototypes for Volkswagen's V.MO vehicle, as seen in 2022 footage posted on the automaker's website. The craft was the product of a partnership with China's Hunan Sunward Technology.
VW and Sunward built two more full-scale prototypes based on that model. One, called "Sky Garden," added a spacious, luxurious cabin and became the project's showcase. In March 2023, Chinese Premier Li Qiang sat inside the mock-up, an endorsement of the project’s alignment with China's growing ambitions for the sector. Sunward didn’t respond to questions about its involvement.
The model was shipped to Volkswagen’s headquarters in Wolfsburg, Germany, for a project review that included CEO Oliver Blume and CFO Arno Antlitz. Antlitz urged the team to push ahead, citing the need to learn from the speed of made-in-China efforts, two people said.
A third prototype was tested at remote sites in Inner Mongolia, where engineers lived and worked in converted shipping containers, the people said.
In October 2023, VW turned to Wanfeng Auto Holding Group, which has an established aviation division, to prepare for launch. Wanfeng, a Chinese company that started as a car-wheel maker, had acquired Austrian aerospace supplier Diamond Aircraft.
The luxury interior of the Sky Garden, as depicted in Volkswagen's promotional images. The model, which won a German design award, was shipped to the automaker's headquarters.
In March 2024, Volkswagen’s top management committee for group operations met to consider bringing the flying car to market. Legal, compliance, finance and strategy teams raised concerns. The long timeline to profitability was one risk. Another was competitiveness. A VW strategy paper warned "momentum in China is already grasped by established Chinese players," naming rival automakers including Xpeng and Geely.
Despite the skepticism, the VW management committee gave the project a green light, but the principal call was left to VW’s China head, Ralf Brandstaetter.
And that’s where the flying car crashed: Brandstaetter concluded VW needed to focus on its core business at a time when its passenger-car sales were sliding. He killed the project in June 2024, telling the team it was disbanded, two people involved said. He broke the news to Wanfeng, the Chinese partner, in a WeChat message, according to documents seen by Reuters.
Brandstaetter didn’t reply to questions about the decision – later endorsed by the board of VW China – to dump the flying car.
Wanfeng also didn’t respond to a request for comment. One of its units said in a November 2024 regulatory filing that the joint-venture agreement with VW had ended.
THE COPS INVESTIGATE
Legal troubles persisted for Zhou, the face of Volkswagen’s flying-car effort, after the project’s demise.
When the criminal probe into alleged trade-secret infringement began in December 2023, police named Zhou – not VW – as the suspect, case documents show. Shanghai prosecutors took up the case in 2024.
Zhang, of Pantuo, said she had filed her criminal complaint against VW, not Zhou.
While the investigation has proceeded, Zhou has been subject to travel restrictions, according to police records seen by Reuters. She said it was "shocking and heartbreaking" that Volkswagen regarded the case against her as an individual legal matter, as top executives had told her as recently as this month.
The Supreme People’s Court’s June decision on the civil lawsuit did not address the criminal investigation. Prosecutors in Shanghai didn’t respond to a request for comment about the case against Zhou.
While the dispute over the flying car was unfolding, Wanfeng, the company VW had once picked to take its vehicle to market, swooped in to buy German aerospace startup Volocopter out of bankruptcy last year.
Editor's note: This story was updated after publication to correct the graphic titled "Sky-high competition," which mislabeled three of the eVTOL craft.
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Reporting by Ju-min Park and Kevin Krolicki in Beijing, Zhang Yan in Shanghai and Claire Fu in Singapore. Writing by Kevin Krolicki and David Dolan. Design and illustration by Catherine Tai. Editing by Brian Thevenot and David Crawshaw.
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