BEIJING, July 26 (TMTPost)— German automobile giant Volkswagen Group is resorting partnership with Chinese rivals to boost its business in the electric vehicle (EV) sector.

Credit：Visual China

Chinese EV manufacturer Xpeng Inc. announced on Wednesday it has sealed a framework agreement on strategic technical collaboration with Volkswagen, and the two parties reached a share purchase agreement for strategic minority investment. Under the investment agreement, Volkswagen will spend about US$700 million to acquire Class A ordinary shares at US$15 per American depositary share. When the deal completes, Volkswagen is set to take an about 4.99% stakes in Xpeng and become the third largest shareholder, next to Xpeng’s CEO and cofounder He Xiaopeng and Alibaba Group. Volkswagen has entitled to appoint an observer at Xpeng’s board upon completion of the investment.    

In pursuit of the strategic technical collaboration, Xpeng and Volkswagen will jointly develop two B-class battery electric vehicles (BEV) models for sale in the Chinese market under Volkswagen brand, leveraging respective core competencies and Xpeng’s full-stack technologies, from EV platform G9 to Connectivity and advanced driver-assistance system (ADAS) software. The models are expected to start production in 2026. The parties will explore additional potential strategic cooperation in a number of areas, including collaboration on future EV platforms, software technologies and supply chain.

The U.S. listed Xpeng shares skyrocketed after announcement of long-term strategic partnership with Volkswagen. Shares soared as much as 42% and settled 26.5% higher to US19.46 on Wednesday, hitting the highest close since August 22, 2022.   

“We will share Smart EV technologies and world-class design and engineering capability with each other and learn from each other,” said He Xiaopeng. According to Ralf Brandstätter, Volkswagen AG Board Member for China, the partnership with Xpeng enables Volkswagen to speed up the expansion of local electric portfolio while preparing for the next step change in innovation. “Local partnerships are a key building block in the Volkswagen Group’s ‘in China for China’ strategy,” Brandstätter noted.

Volkswagen also disclosed the same day that its subsidiary Audi has inked a long-term framework agreement on technical collaboration with SAIC Motor, furthering cooperation with China’s largest carmaker. Volkswagen said the models, as a result of the new collaboration, would be under Audi brand, but didn’t specify which models Audi and SAIC would develop together or when the two companies could set up a joint venture to produce these models.

Audi was reported earlier this month to consider acquisition of an EV platform from IM Motors, a Shanghai-based premium EV brand backed by SAIC. Audi China later said it would like to work with all parties to formulate strategies as Chinese auto market is experiencing the biggest ever revolution in history. If the reported attempt for EV technology were accurate, it would be the first time for a foreign auto brand to buy auto tech from Chinese rivals.

SAIC’s Vice President and Chief Engineer Zu Sijie suggested last week that SAIC and Audi would ramp up EV cooperation. Zu said SAIC and Audi have agreed that the two parties will expedite the development of EVs through cooperation, and since Chinese auto market is experiencing unprecedented transition, both parties will further deepen their strategic partnership and open a new chapter of cooperation to ensure a win-win outcome. SAIC was said to have diversified cooperation with Audi, such technology licensing and joint development, and Audi was said to seek more cooperation on fields like intelligent driving control solutions and EV platform while maintaining its own style in design.

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