Volkswagen teams up with XPeng to accelerate counterattack

Author | Wang Xiaojuan

Editor | Zhou Zhiyu

Over the past year, the cooperation between Volkswagen and XPeng has deepened time and time again.

Following the cooperation agreement on electronic and electrical architecture signed on April 17, Volkswagen and XPeng have taken their cooperation in this area to the next level.

On July 22, XPeng announced that it had signed a strategic cooperation agreement with Volkswagen Group on electronic and electrical architecture technology, committing to jointly develop industry-leading electronic and electrical architectures for Volkswagen's CMP and MEB platforms produced in China.

According to sources familiar with the matter, the recent official announcement indicates new progress in the project, with both parties passing a milestone recently.

When the cooperation was first established in 2023, XPeng and Volkswagen publicly disclosed their cooperation progress, initially agreeing to jointly develop two B-class electric vehicle models by 2026.

With the signing of this joint development agreement, XPeng and Volkswagen's cooperation in electronic and electrical architecture now extends not only to Volkswagen's models in China but also includes strategic cooperation on electronic and electrical architecture for Volkswagen's global market.

The progress of the cooperative project is now clearer. Currently, joint development project teams have been established in both Guangzhou and Hefei by XPeng and Volkswagen, with hundreds of Volkswagen engineers working at XPeng's headquarters in Guangzhou. Both parties have begun specific project work, and the first model equipped with the jointly developed electronic and electrical architecture is expected to go into mass production within 24 months.

In the view of the aforementioned sources, besides project progress, another difference lies in the depth of cooperation. Previously, the electronic and electrical architecture developed by both parties was only applied to Volkswagen's models in the Chinese market. Now, XPeng will be involved in Volkswagen's global electrification process.

This collaboration is mutually beneficial for both parties.

For Volkswagen, the electrification process needs to be faster than other brands in China. This is because China accounts for over 1/3 of Volkswagen's sales.

Volkswagen used to be the sales leader in the Chinese market, but now it has been surpassed, and even the combined sales of Volkswagen's northern and southern regions cannot beat BYD.

In the first half of this year, Volkswagen sold 1.35 million vehicles in the Chinese market, a year-on-year decrease of 7.4%. Meanwhile, BYD's sales exceeded 1.6 million vehicles, with domestic retail sales reaching 1.385 million vehicles.

Globally, Volkswagen's electrification rate is also not high. In 2023, the Volkswagen Group sold a total of 9.24 million vehicles, but only 771,000 were pure electric vehicles, accounting for less than 10%. This means that if Volkswagen wants to continue leading in the next era of automobiles, it needs to accelerate its electrification efforts.

Whether it is the proportion of the Chinese market in its business, the speed of decline in the Chinese market, or future planning, all compel Volkswagen to rapidly electrify and develop more intelligent electric vehicle models. At this juncture, Volkswagen joining hands with the technologically advanced XPeng is an efficient way to improve its efficiency.

For XPeng, there is currently no stable sales volume leader, and the monthly sales of over ten thousand vehicles are clearly insufficient to support its long-term positive cycle. Apart from selling cars, XPeng also needs a stable second curve, and exchanging technology for profits is becoming XPeng's new profit model In addition to the 5 billion yuan invested a year ago, future continuous technology service fees will relieve some financial pressure on XPeng, allowing for further substantial investment in technology.

While focusing on the second curve, XPeng's main business is still selling cars. Currently, XPeng's sales volume lags behind its former partners such as Li Auto and Nio.

In the future, XPeng will need to make more efforts in selling cars. Only with both aspects combined can the probability of staying in the game be increased