Volkswagen Group plans to invest $700 million in Xpeng and jointly develop electric vehicles in China as the German automaker fights to halt a sales slide in its most important market.
VW Group will eventually hold a 4.99 percent stake in the Chinese EV maker via a capital increase and is getting an observer board seat, VW said in a statement on Wednesday.
VW Group and Xpeng will develop two VW brand battery-powered models on the MEB platform at VW’s new technology center in Hefei, the automaker’s largest development location outside Wolfsburg. The midsize EVs will be rolled out in China starting in 2026.
Xpeng is one of the smaller players in China’s EV space. Its sales dropped by 40 percent in the first half, but it is betting on its newly launched G6 crossover, priced 20 percent below Tesla’s Model Y and equipped with the company’s latest software, to boost growth.
Xpeng’s XNGP advanced driver assistance system, upgraded in March this year, is similar to Tesla’s Full Self-Driving technology that the U.S. automaker rolled out four years ago but has yet to make available in China.
Audi, SAIC tie-up
VW Group also announced plans for further cooperation between its subsidiary Audi and SAIC Motor including jointly developed models and a new platform, but fell short of providing details or a timeline.
Audi’s partnership with SAIC will cover premium EVs and start with models in a segment where the brand is not yet represented in China, the automaker said.
Both agreements are for future joint development of new local platforms for the next generation of intelligent, fully connected vehicles, VW Group said.
VW Group China chief Ralf Brandstaetter said the partnerships will significantly optimize development and procurement costs.
The deals, which bring VW Group’s count of automaker partnerships in China to four, mark a turning point for China’s manufacturers — from learning from foreign partners to helping them with their own technology and designs.
VW is trying to turn the tide in China, where Tesla and local champion BYD have raced ahead because they are better at producing EVs with technology and software geared to local tastes.
The German company’s EV sales in China dipped in the first half in a market that grew 20 percent.
VW Group last month replaced the CEO of Audi partly because it wants to halt sliding sales in the country. The premum brand has faced delays in developing a new EV platform, hindering its ability to compete.