On Thursday, Volkswagen and Chinese electric vehicle (EV) partner XPeng announced their first collaboration. They will jointly source parts to develop an SUV.
Announcing a “master agreement” for platform and software collaboration, the automakers revealed their plan to launch a joint sourcing program in a statement. This program aims to provide shared platform and vehicle parts for both partners, leveraging scale to reduce costs.
In a partnership initiated in July, Volkswagen declared its intention to acquire 4.99% of Xpeng for around $700 million, marking the first step. The collaboration aims to jointly introduce two electric vehicle models by 2026. The purchase was completed in December.
Volkswagen, aiming to regain lost market share in China to local competitors, announced that joint purchasing economies and innovations in design and engineering will reduce development time by more than 30 percent. This strategic approach underscores their commitment to efficiency and competitiveness in the market.
“In the world’s largest and fastest growing EV market, speed is fundamental,” Volkswagen Group board member and China chief Ralf Brandstatter said in a statement on Thursday.
Cars produced under the partnership will bear the Volkswagen logo. However, they will use a jointly developed platform based on the decade-old startup’s G9 “Edward” technology.
In late 2022, Volkswagen lost the title of best-selling car brand in China to local EV manufacturer BYD. This shift occurred due to increasing competition from EV makers and Volkswagen’s reliance on gasoline vehicles, whose sales have been declining.
Last year, Volkswagen announced the development of a new manufacturing platform in China. The platform is based on its modular “MEB” platform for entry-level EVs, utilizing more local components to reduce costs.
It will also allocate approximately 1 billion euros ($1.08 billion) to establish a new EV development and procurement center in Hefei.
In January, China witnessed a 38.8% decline in new energy vehicle sales compared to the previous month, marking the first drop since August. This downturn occurred despite a renewed discounting campaign led by US EV maker Tesla, indicating a failure to boost demand.
In the midst of numerous electric vehicle manufacturers striving to reduce expenses, Xpeng stands out by revealing plans to hire 4,000 people this year. Additionally, the company will invest millions of dollars in artificial intelligence to navigate what it refers to as a “bloody sea” of competition.
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