The German automaker will invest $700 million in the young Chinese Xpeng and become the owner of 4.99% of its shares. By 2026, Volkswagen will develop and launch two subcompact electric vehicles for the Chinese market with the help of Xpeng, with even closer technology cooperation expected in the future.
Volkswagen continues to rely on Chinese electric vehicle platforms, because the development of its own stalled due to problems with the software: last week Audi and SAIC agreed to jointly develop electric vehicles, and now the parent company Volkswagen has decided to rely on a new Chinese partner – the young company Xpeng.
The Xpeng electric car company was founded in 2014 by a group of Chinese businessmen with experience in the automotive and IT sectors, the first model entered the market in 2018, and now the Xpeng product line has five models, including the G6 mid-size crossover debuted this spring (on title photo) aimed at competing with the Tesla Model Y.
Xpeng is not the most successful of the young Chinese companies, but in terms of sales, it is a strong middling. Last year was a record year for Xpeng: 120,757 electric vehicles were sold, which is 23% more than in 2021, but already in the fourth quarter of last year, there was a decline in sales, which continues to this day. Xpeng sold 8,620 electric vehicles last month, down 43.6% from June 2022. The reason for the decline is fierce competition and a price war in the Chinese market. Xpeng produces quite expensive premium segment electric cars, it is more difficult for it to dump than, for example, the current leader of the Chinese car market, BYD, which has a very wide range of models designed for any budget.
To complete the picture, we add that Xpeng, due to the high costs of developing and manufacturing new models, has not yet made a profit: a net loss at the end of last year amounted to 1.33 billion US dollars. Nevertheless, Volkswagen Group management considered Xpeng an interesting company in terms of investment and long-term cooperation – perhaps it was the lack of own funds that prompted Xpeng to make a deal with Volkswagen.
There are still few details of the upcoming cooperation: two B-class electric trains under the Volkswagen brand have been announced for 2026. The Xpeng press release says that these new items will receive the Xpeng G9 platform, which is rather strange, since this is a large flagship crossover and its platform is difficult to imagine in a B-class electric car. The press release also says that new Volkswagen models will borrow a digital platform and driver assistance systems from Xpeng – this is just logical, because Volkswagen has problems with software, not hardware.
Xpeng G9
Recall that last year, Volkswagen extended the life cycle of its modular MEB platform, which has long been localized in China at joint ventures with SAIC and FAW, and this platform has a junior version of MEB Entry just for B-class electric vehicles, but, apparently, it is not very suitable for China, and from a business point of view, it is easier and more profitable to take ready-made local solutions.
Xpeng and Volkswagen are also discussing the possibility of developing joint platforms and software for electric vehicles in the future, as well as connecting supply chains of components. In general, the partners are set for multilateral and long-term, rather than one-time cooperation.
Xpeng shares on the stock exchange have risen in price by more than 33% over the past day, while Volkswagen, on the contrary, has fallen in price by about 4%, because its reliance on Chinese technology is getting stronger and investors don't like it very much.
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