VW takes almost 5% in Xpeng and signs technology agreement

The Volkswagen brand has concluded a technological framework agreement for long-term cooperation with the Chinese electric car start-up Xpeng. The Wolfsburg-based company is also taking a stake of about 5% 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, 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 occur via the recently established Volkswagen Group China Technology Company (VCTC). According to VW, more than 2 000 development and procurement experts will work there on developing new intelligent, fully networked electric vehicles.

5% stake in Xpeng

To clarify that the cooperation on the two mid-range models is long-term, the VW Group is investing around $700 million (± €632 million) 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% of Xpeng.

In addition, VW will have an observer seat on the board of directors of Xpeng, 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 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 also temporarily halted its planned European expansion in June 2022 but announced new plans at the beginning of this year.

And what about Audi?

In its official statement, the German automotive group commented on the deal between Audi and SAIC for the first time. “Audi has agreed with its Chinese joint venture partner SAIC in a strategic memorandum to expand the existing cooperation further.”

“Through joint development work, the range of intelligent, fully connected electric vehicles in the premium segment will be expanded quickly and efficiently. The plan is to start with electric models in a segment where Audi is not yet represented in China,” it says.

The company doesn’t give more details, except for some 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 rumored.

However, since Audi’s electric offering is to be “expanded quickly and efficiently”, this could allude to acquiring a fully developed platform. As with VW and Xpeng, Audi and SAIC are still negotiating a collaboration on future e-platforms.

Important China

Meanwhile, it’s all hands on deck at VW concerning China. The importance of the most prominent car market in the world for the VW Group can’t be underestimated, especially now that its strong foothold over there is waning. VW seems to be struggling to convince digital-savvy customers with its ID range. Chinese buyers demand more software and connectivity in their new EVs.

“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,” said 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 leverage 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 optimize development and procurement costs significantly,” he added.

“The Volkswagen Group and Xpeng each bring highly complementary strengths into this long-term strategic partnership. We will share smart EV technologies and world-class design and engineering capability and learn from each other,” said 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,” he added.