Adding that the duo launched a “strategic technical collaboration” effort, Guangzhou-based Xpeng said the two companies would “jointly develop two B-class battery electric vehicles” for the Chinese market by 2026. The cars will be sold under the Volkswagen marquee, “leveraging respective core competencies and XPENG’s G9 platform and Connectivity and ADAS software,” Xpeng added.
“The Volkswagen Group and XPENG each brings 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,” Xpeng CEO and chairman Xiaopeng He said in a statement.
“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.
China is by far the world’s largest market for EVs, thanks to government subsidies for the industry since 2009 and a plan since 2020 to totally phase out gasoline-only automobiles in 15 years. As a result, EVs are expected to constitute 35% of all car sales in China this year, and could exceed 60% of global EV sales.
China has its own powerful domestic EV industry, but foreign automakers are still fighting for space in the Chinese market, including the German VW and American Tesla.
Wang Hanyang, an auto analyst at Shanghai-based 86Research, told US media the VW-Xpeng deal could be “just the beginning of cooperation between Western carmakers and China EV startups.”
Future collaborations “will not be limited to the Chinese market but will extend to the global market, with the output of China’s advanced EV technology through joint ventures, collaborative research, and other means,” he added.
Despite being one of the world’s largest automakers, the Wolfsburg-based VW has been steadily losing ground in the Chinese market and experts said the Xpeng deal is intended to reverse that trend. Xpeng, a nine-year-old startup with only a handful of EVs on the market, was able to hold an IPO in New York in 2020 after three rounds of fundraising.
Xpeng Co-President Brian Gu told US media the deal will bring a “significant” source of revenue to help the company reach profitability sooner than expected.
“This deal provides us an opportunity to have significant recurring revenue coming from this collaboration,” he said. “With growth of our own brand sales as well as additional revenue from tech collaboration we think we can actually achieve profitability sooner than originally expected.”
The deal comes after VW announced a $1.1 billion plan to build a new development, innovation and procurement center in Hefei, at which the new EVs will be produced.
In addition, VW-owned Audi announced its own deal with the Shanghai-based SAIC Motor last week to produce luxury EVs for the Chinese market.
"Following on from the first two successful years of cooperation, we are now strengthening our long-term commitment to SAIC,” Jürgen Rittersberger, a member of Audi’s management board responsible for finance, IT, and legal affairs, said on Wednesday.
“Our aim is to jointly develop next-generation premium ICV swiftly and efficiently 'in China for China.' Even closer cooperation with a local partner such as SAIC supports Audi's ambition to create a premium market segment for all-electric and fully connected cars in China."
In January 2022, the two companies opened a massive flagship showroom in Shanghai to showcase seven Audi models being introduced in the Chinese market.