Automotive giant, Volkswagen, has tapped Chinese start-up, Xpeng, to jointly develop new energy vehicles.
The Wolfsburg-based car manufacturer would invest $700 million to purchase a 4.99 per cent stake in the company and an observer’s seat on the board, according to a LinkedIn post by Volkswagen China chief executive, Ralf Brandsatter.
Both companies have outlined plans to build two mid-sized electric vehicles for the Chinese market by 2026.
Partnering with one of China’s fastest-growing EV brands would expand the company’s position in a hyper-competitive marketplace, said Brandsatter said.
China leads the world in both EV production and sales. Approximately 30 per cent of all new vehicles registered in the country are EVs or hybrids, with that figure set to reach 50 per cent by 2025, according to Brandsatter.
Both vehicles will be manufactured under the ‘VW’ badge and will be based on the Edward platform, much like the Xpeng G9 and P7 models.
Although Volkswagen has spent the last three years bolstering its EV development capabilities by establishing partnerships with prominent Chinese tech and AI firms including Horizon Robotics, Thundersoft and Gotion Hi-Tech, it still lags behind Tesla and fellow Chinese EV manufacturer BYD in terms of overall sales on the mainland.
VW is acutely aware it is playing catchup to some of the foremost EV brands in the world’s largest market and is leaning on its domestic partners with mature technologies to fast-track its growth, Shanghai-based independent analyst, Gao Shen, told the South China Morning Post.
Japanese automotive brands are losing ground to the likes of BYD and Tesla, experiencing a sharp slide in sales volumes since 2022.
Mazda, Toyota, Mitsubishi, Subaru, Nissan and Honda accounted for 1.71 million new vehicles sold last year, roughly 20 per cent decline year-on-year, as per statistics provided by Tokyo-based analysts, MarkLines.
Volkswagen has also established partnerships with other Chinese EV firms recently. The company’s Audi brand announced it would be working with Shanghai-based SAIC Motor to develop a platform for premium EVs, while tech publication, Electrek reports the iconic Volkswagen Jetta brand is collaborating with Leapmotor to create a class of economical EVs.
The markets responded positively to the VW-Xpeng partnership. Xpeng’s Hong Kong listing surged with the news, increasing by 34.5 per cent to reach a record high of HK$81.35 in just a handful of hours.
The start-up’s Wall Street listing saw impressive growth too, jumping roughly 42 per cent with the news before settling at a closing rate of $19.46, according to the South China Morning Post.