VW and Audi agree strategic co-operations with local automakers

Volkswagen Group is strengthening its position in the Chinese automotive market with co-operations between the VW brand and XPENG and between Audi and SAIC.

The Group is thus forging ahead with its local electrification strategy. The aim is to swiftly tap into new customer and market segments, thereby systematically leveraging the potential of China’s dynamically growing e-mobility market.

The VW brand has concluded a technological framework agreement with XPENG. The initial stage of the co-operation will provide for the joint development of two VW brand electric models for the mid-size segment in the Chinese market. The China-specific vehicles will supplement the MEB product portfolio and are to be rolled out in 2026 in China. This is subject to the conclusion of final agreements. As part of the close and long-term strategic co-operation, the Volkswagen Group is to invest approximately US$700 million in the Chinese manufacturer of intelligent electric cars. Volkswagen is thus acquiring 4.99 percent stake in XPENG at US$15 per ADS (*) by way of a capital increase and will hold a seat as an observer on the XPENG board of directors. The share issuance will be subject to customary closing conditions including applicable regulatory approvals.

Audi has signed a strategic memorandum with its Chinese joint venture partner SAIC to further expand existing co-operation. Joint development activities are to extend the portfolio of fully connected electric vehicles on offer in the premium segment swiftly and efficiently. It is planned to start with electric models in a segment where Audi does not as yet have a presence in China.

The jointly developed e-models are to be equipped with state-of-the-art software and hardware, in order to offer Chinese customers an intuitive, connected digital experience. All parties are contributing their respective core competences to the development effort.

Both agreements also envisage a planned, future joint development of new local platforms for the next generation of intelligent, fully connected vehicles (ICV). The partnerships aim to swiftly expand the Group’s product range with further models from China for China in particularly promising customer and market segments. The details of co-operation on future e-platforms are the subject of further negotiations between the partners.

Ralf Brandstätter, Volkswagen AG Board Member for China, commented: “Local partnerships are an important building block in the Volkswagen Group’s ‘in China for China’ strategy. We are now accelerating the expansion of our local electric portfolio and at the same time preparing for the next innovation step. With XPENG, we now have another strong partner that is one of the leading manufacturers in China in key technology areas. In a competitive and dynamic market environment, we are leveraging the strengths of Volkswagen and our partners to create synergies to bring additional products to market faster. In doing so, we focus on the specific needs of our customers in China. At the same time, we want to significantly optimise development and procurement costs.”

Volkswagen Group (China) Technology Company assumes development responsibility for new Volkswagen models

The recently founded Volkswagen Group China Technology Company (VCTC) is the development partner for XPENG. The new development, innovation and procurement centre is the Group’s largest development location outside Wolfsburg. Going forward, this is where over 2,000 development and procurement experts will work on new intelligent, fully connected electric vehicles.

Optimising development and procurement volumes generates significant synergy potential with cost advantages compared with current vehicle projects.

Partnerships are next important step in the Group’s “in China for China” strategy

The co-operations tie in with the Group’s “in China for China” strategy to address market-defining trends in China at an early stage and leverage the growth dynamics and innovative strength of the Chinese market more effectively. In order to speed up decision-making and development processes in the region, Volkswagen is strengthening its local capacities for e-mobility as well as digitalisation and autonomous driving.

To this end, Volkswagen is expanding its Hefei plant in east China’s Anhui Province into a state-of- the-art production, development and innovation hub. Production at Volkswagen Anhui’s new vehicle plant will commence this year. VW Anhui Component Company is building a manufacturing facility for high-voltage battery systems in Hefei. Furthermore, Volkswagen Group China Technology Company is setting up a development and procurement centre for fully connected, intelligent electric vehicles in Hefei.

At the same time, the Volkswagen Group is also focusing on partnerships with local high-tech companies. For Volkswagen Group China, high technology localisation and systematic customer orientation are the key to playing a leading role in the new era of intelligent connected vehicles (ICV).

He Xiaopeng, Chairman and CEO of XPENG: “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. 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.”

Stefan Mecha, CEO VW Brand Region China: “The VW brand has a long-term electrification- strategy for the Chinese market. In doing so, we continue to consistently rely on our high- performance MEB and SSP architectures. With the strong growth of the electric segment, there are now further market opportunities that we want to exploit. We are also focusing on joint development projects with strong local partners in order to rapidly expand our product portfolio. Together with XPENG, we aim to put two additional fully connected electric vehicles on the road from early 2026 onwards, thus opening up new customer groups for the VW brand.”