VW signs technology framework agreement with Xpeng

The Volkswagen brand has concluded a technological framework agreement for China on a long-term cooperation with the Chinese electric car startup Xpeng. The Wolfsburg-based company is also taking a stake in Xpeng, and the Audi deal with SAIC was also confirmed by the Group.

With the new collaboration with Xpeng, Volkswagen wants to further advance its local electrification strategy. And above all, it aims to increase the pace of development: “The aim is to swiftly tap into new customer and market segments, thereby systematically leveraging the potential of China’s dynamically growing e-mobility market,” Volkswagen wrote.

Two electric mid-range models from VW will be launched on the market in 2026, which are to be developed jointly with Xpeng as part of that agreement. These two models, which are not yet described in detail, are to complement the MEB product portfolio as China-specific vehicles. The agreement also includes a “planned future joint development of new local platforms for the next generation of smart, fully connected electric vehicles”. Details here, however, are still subject to further negotiations.

From VW’s side, the cooperation will take place via the Volkswagen Group China Technology Company (VCTC) – when this eMobility development centre was presented in April, the project name was still ‘100%TechCo’. According to VW, more than 2,000 development and procurement experts will work there on the development of new intelligent, fully networked electric vehicles.

VW takes almost five per cent stake in Xpeng

To make it clear that the cooperation on the two mid-range models is long-term, the VW Group says it is investing around 700 million dollars (currently 632 million euros) in Xpeng. According to the statement, the investment will be made within the framework of a capital increase, in which VW intends to acquire 4.99 per cent of Xpeng. In addition, VW will have an observer seat on the board of directors of Xpeng – although probably without voting rights. The new share issue is subject to the usual closing conditions, including approval by the relevant authorities.

Xpeng has made a name for itself, among other things, through its fast pace of development and its rapidly growing model range. In addition, models such as the P7 and P5 electric sedans have impressed testers with their extensive connectivity features. On the Chinese market, however, this is only working to a limited extent: in 2022, the company still delivered a little more than 120,000 electric cars and so far this year, Xpeng has not managed more than 10,000 units per month. Xpeng temporarily halted its planned European expansion in June 2022, but announced new plans at the beginning of this year.

In the statement, the German automotive group also commented  on the deal between Audi and SAIC for the first time, which was initially rumoured before an agreement was confirmed from China. “Audi has agreed with its Chinese joint venture partner SAIC in a strategic memorandum to further expand the existing cooperation. Through joint development work, the range of intelligent, fully connected electric vehicles in the premium segment is to be expanded quickly and efficiently. The plan is to start with electric models in a segment in which Audi is not yet represented in China,” it says.

Platform takeover by Audi not confirmed

This would fit with previous information that Audi and SAIC intend to focus on electric mid-range models. The German carmaker based in Ingolstadtis already building an electric car plant jointly with FAW, where PPE electric cars will be built from the end of 2024, for when Audi has previously announced the Q6 e-tron and A6 e-tron on this platform. “The jointly developed e-models are to be equipped with state-of-the-art software and hardware, in order to offer Chinese customers an intuitive, connected digital experience. All parties are contributing their respective core competences to the development effort,” VW added.

The company does not get more specific at this point, leaving only rather vague statements about the segment and the exact scope of the cooperation. There is mention of joint development work but not explicitly of the purchase or licensing of an entire EV platform, as was rumoured. However, since Audi’s electric offering is to be “expanded quickly and efficiently”, precisely this could be an allusion to the acquisition of a fully developed platform. As with VW and Xpeng, Audi and SAIC are still negotiating a collaboration on future e-platforms.

“Local partnerships are an important building block in the Volkswagen Group’s ‘in China for China’ strategy. We are now accelerating the expansion of our local electric portfolio and at the same time preparing for the next innovation step,” says Ralf Brandstätter, the VW board member responsible for China. “With Xpeng, we now have another strong partner that is one of the leading manufacturers in China in key technology areas. In a competitive and dynamic market environment, we are leveraging the strengths of Volkswagen and our partners to create synergies to bring additional products to market faster. In doing so, we focus on the specific needs of our customers in China. At the same time, we want to significantly optimize development and procurement costs.”

“The Volkswagen Group and XPENG each bring in highly complementary strengths into this long-term strategic partnership. We will share Smart EV technologies and world-class design and engineering capability with each other and learn from each other,” says He Xiaopeng, Chairman and CEO of Xpeng. “Since the founding of Xpeng, we have been developing full-stack technologies from EV platform to connectivity and ADAS software in-house. We are excited about the opportunity to contribute our expertise to the strategic partnership and create value for Xpeng and our shareholders.”

Stefan Mecha, CEO of the VW brand in the China region, states that VW continues to consistently focus on the “high-performance MEB and SSP architectures”. “With the strong growth of the electric segment, there are now further market opportunities that we want to exploit. We are also focusing on joint development projects with strong local partners in order to rapidly expand our product portfolio,” he said.



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