This chapter analyses the innovation practices of Volkswagen de México (VWdM), a key subsidiary of the Volkswagen Group and one of the most prominent automotive manufacturers in Mexico. Drawing on the Innovation Systems from Below (ISFB) framework and empirical evidence from fieldwork and documentary research, the chapter examines how VWdM has developed innovation capabilities under institutional constraints. It explores the firm’s evolution from a high-volume assembler into a regional orchestrator of innovation, concentrating on three interrelated dimensions: internal knowledge development, frugal innovation, and orchestration of local institutional networks. Through initiatives such as the Corporate Innovation Department, Technical Centre, dual training programmes, and academic partnerships, VWdM demonstrates how multinational subsidiaries can drive innovation in emerging markets, even in the absence of robust state coordination. The analysis maps VWdM’s innovation activities and situates the firm within the innovation space map. The chapter offers insights into how operational subsidiaries can become embedded knowledge actors, contributing to regional innovation systems through process optimisation, competence-building, and strategic alignment with global production mandates.