German automaker Volkswagen and Chinese electric vehicle (EV) partner XPeng announced on Thursday their plans to jointly develop an SUV as their first collaborative project. The companies have signed a “master agreement” for platform and software collaboration, aiming to reduce costs through a joint sourcing program for platform and vehicle parts used by both partners.
This development marks a significant step in their partnership, which was initiated in July when Volkswagen acquired 4.99% of XPeng for approximately $700 million. The purchase was finalized in December, with plans to jointly launch two EV models by 2026.
See also: XPeng and Volkswagen Enter Platform and Software Collaboration Agreement
Volkswagen, aiming to regain market share in China lost to local rivals, emphasized that economies of scale from joint purchasing, combined with innovations in design and engineering, will significantly reduce development time.
Cars produced through this partnership will bear the VW logo and feature a jointly developed platform based on XPeng’s G9 “Edward” technology. Volkswagen, which previously held the title of best-selling car brand in China, ceded this position to local EV manufacturer BYD in late 2022.
To compete in China’s rapidly evolving EV market, Volkswagen plans to develop a new manufacturing platform derived from its modular “MEB” platform for entry-level EVs and increase the use of local components to lower costs. The company is also investing approximately 1 billion euros ($1.08 billion) in a new EV development and procurement center in Hefei city.
See also: Volkswagen Completes 4.99% Share Acquisition in Xpeng for $705.6 Million
Meanwhile, China’s new energy vehicle sales experienced a 38.8% decline in January compared to the previous month, marking the first drop since August. Despite this challenging market environment, XPeng announced plans to hire 4,000 people this year and invest heavily in artificial intelligence to stay competitive in the evolving EV landscape, which it described as a “bloody sea” of competition.
