BERLIN (Reuters)- Volkswagen (VOWG_p.DE) announced on Wednesday that it is collaborating with Chinese EV startup Xpeng and joint venture partner SAIC to develop new vehicles and perhaps co-create platforms in order to defend market share.
The Volkswagen brand will collaborate with Xpeng Inc (9868.HK) to build two cars aimed at the middle-class category that will bear the VW label but contain Xpeng know-how in software and autonomous driving, marking a victory for the EV company that is less than a decade old.
The new cars, which will be available starting in 2026, will fill a vacuum in Volkswagen’s product selection in China, where the market for so-called “new energy vehicles” has developed faster than predicted and Volkswagen trails local competitors like Tesla (TSLA.O).
Volkswagen’s China Chief Ralf Brandstaetter recently criticised the market in China for electric, plug-in and fuel cell vehicles as becoming too crowded and lacking funding for long-term development.
The carmaker said it will invest around $700 million in Xpeng and purchase a 4.99% stake in the company.
Brandstaetter has long said that Volkswagen’s China strategy rests on collaborating with local actors, with Xpeng the latest in a string of partnerships with Chinese firms that have included battery-maker Gotion and technology firm Horizon Robotics.
The automaker is facing intense investor pressure over its China presence, both in terms of increasing EV sales and guaranteeing a clean slate on labor rights problems in the Xinjiang area, where it co-owns a facility with SAIC.
Ralf Brandstaetter, Volkswagen’s China Chief, has criticized the Chinese market for electric, plug-in, and fuel cell vehicles as being overcrowded and lacking financing for long-term growth.
The automaker announced a $700 million investment in Xpeng and a 4.99% interest in the firm.
Brandstaetter has long stated that Volkswagen’s China strategy is based on partnering with local players, and Xpeng is the latest in a run of collaborations with Chinese enterprises that has included battery producer Gotion and technology firm Horizon Robotics.
Volkswagen’s China Chief Ralf Brandstaetter recently criticised the market in China for electric, plug-in and fuel cell vehicles as becoming too crowded and lacking funding for long-term development.
The carmaker said it will invest around $700 million in Xpeng and purchase a 4.99% stake in the company.
Brandstaetter has long said that Volkswagen’s China strategy rests on collaborating with local actors, with Xpeng the latest in a string of partnerships with Chinese firms that have included battery-maker Gotion and technology firm Horizon Robotics.
According to Daniel Roeska of Bernstein Research, the cooperation provides Xpeng, one of the smaller participants in China’s EV market, with access to Volkswagen’s supply chain and sourcing skills as well as a boost to the reputation of its platform and technology.
Volkswagen also revealed plans for more collaboration between its affiliate Audi and Chinese heavyweight SAIC (600104.SS), but did not define which models the two firms would develop jointly or when a joint platform may be developed.
The cars would be in a class Audi has yet to enter in China, according to the firm, as the luxury brand tries to catch up in China’s electric vehicle industry, where it has so far performed poorly.