Alliance in China

In the 'ocean of blood' of the electric car Vw and Xpeng will start with an SUV

Cars produced by the partnership will display the Volkswagen logo and be built on a platform based on the start-up's G9 'Edward'.

by Finance Review

29 February 2024

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An 'ocean of blood'. This is how the top management of the Chinese battery car start-up Xpeng, listed in New York and Hong Kong, imagine the car market at this historic moment. Unbridled competition. Which will claim victims. Meanwhile, XPeng and partner Volkswagen have made it known that the first car they intend to develop together will be an SUV for which they will jointly source components.

As part of a 'framework agreement' for collaboration on platform and software, the car manufacturers stated in a statement that they will initiate a joint procurement programme for the platform and vehicle parts used by both partners, exploiting scale to reduce costs.

The announcement marks a step forward in a partnership that began back in July 2023, when Volkswagen declared that it wouldbuy 4.99% of Xpeng for around USD 700 million, with the intention of jointly launching two Ev models by 2026. Transaction completed in December.

Volkswagen, in the hunt for market share in China, a market that has proven to be very difficult on the electrified vehicle front, has stated that the economies of scale resulting from the joint purchase, combined with innovations in design and engineering, will reduce development time by more than 30 per cent.

'In the world's largest and fastest growing EV market, speed is of the essence,' said Ralf Brandstatter, Volkswagen Group board member and head of China.

Cars produced through the partnership will display the VW logo but will be equipped with a jointly developed platform based on the Chinese start-up's G9 'Edward' technology.

Volkswagen relinquished its title as China's best-selling car brand to local electric vehicle manufacturer BYD at the end of 2022, as competition from electric vehicle manufacturers added to the incumbent carmaker's dependence on petrol-powered vehicles, whose sales are declining.

Last year, Volkswagen said it would develop another production platform in China derived from its modular 'MEB' platform for entry-level EVs and use more local components to reduce costs. In addition, it is investing around EUR 1 billion in a new electric vehicle development and procurement centre in the city of Hefei.

Sales of new energy vehicles in China fell 38.8 per cent in January compared to the previous month, the first such drop since August, as a new rebate push led by US EV manufacturer Tesla failed to drive demand.

While many electric vehicle manufacturers are racing to cut costs, Xpeng this month said it will hire 4,000 people this year and invest millions of dollars in artificial intelligence to avoid drowning in the 'ocean of blood' of competitors.