Xpeng Motors and Volkswagen Sign Strategic Technology Cooperation Agreement for Electric Vehicle Development

On February 29, Xpeng Motors and Volkswagen Group signed a joint development agreement for platform and software strategic technology cooperation, accelerating the joint research and development of two B-segment electric vehicles.

As an important part of the joint development agreement, Xpeng and Volkswagen also established a joint procurement plan for the shared components of both parties’ models and platforms. By integrating the scale advantages of both parties and relying on Volkswagen Group’s world-class supply chain capabilities, they aim to reduce platform costs, play out the synergistic effects of strategic cooperation, and enhance the competitiveness of the jointly developed B-segment electric vehicles.

Xpeng stated that this is the first time the two parties have signed a platform and software strategic technology cooperation joint development agreement following the framework agreement. Thanks to the scale advantages of both parties and Volkswagen Group’s world-class supply chain capabilities, Xpeng‘s “smart drive” and “system” capabilities will greatly reduce the model platform costs and enhance the competitiveness of the jointly developed B-segment electric vehicles.

On the evening of July 26, 2023, Volkswagen Group announced that the Volkswagen brand and Xpeng had reached a technical framework agreement. In the initial stage of cooperation, the two parties plan to jointly develop two electric vehicle models of the Volkswagen brand for the medium-sized vehicle market in China.

As part of the strategic cooperation, Volkswagen Group will invest approximately $700 million in Xpeng and acquire about 4.99% of Xpeng Auto’s equity at a price of $15 per ADS (American Depositary Share, each ADS represents two Class A ordinary shares). The above investment was completed on December 6 last year.

In the past few years, Xpeng has been committed to creating technology labels and is one of the earliest domestic car companies to apply city intelligent driving assistance. In 2023, Xpeng released the Feiyao architecture, which comes standard with an 800V high-voltage silicon carbide platform, uses CIB battery body integration technology, and has high-speed and city intelligent driving assistance capabilities.

Recently, Xpeng stated that it will further increase R&D efforts, planning to recruit about 4,000 people this year and invest more than 40% of the R&D budget compared to last year; it is estimated that the annual R&D investment in “AI technology with smart driving as the core” will total 3.5 billion yuan.

In contrast, Volkswagen has shortcomings in fields such as electric architecture, intelligent driving software, and intelligent cockpit software. When Volkswagen launched the MEB platform, it was repeatedly postponed due to software development problems, and informed sources said that Volkswagen’s subsequent platform architectures such as PPE and SSP might also be delayed due to software issues.

In addition to announcing the joint development agreement with Xpeng, Volkswagen recently made personnel adjustments to its software company Cariad China. On February 28, Volkswagen Group announced that from March 1, 2024, Mr. Han Sanchu, the former CTO of Changan Technology and the Chief Software Architect of Changan Auto, will take over the management of CARIAD China from Mr. Changqing, becoming the CEO of CARIAD China and joining the Volkswagen Group (China) management board, serving as the executive vice president of the Group (China).

Ralf Brandstätter, director of Volkswagen Group China region, said: “China is the largest and fastest-growing electric vehicle market in the world. Speed is crucial if we want to tap into highly potential niche markets and gain a leading edge. We firmly implement the ‘In China, For China’ strategy, aim to meet the unique needs of Chinese customers, continuously expand our local product portfolio, and continuously enhance our R&D strength. Through cooperation with Xpeng Motors, we will shorten the product development cycle, improve efficiency, and optimize cost structure. In a market environment that is highly sensitive to price, this will greatly enhance the economic competitiveness of the product.”

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