Beijing, February 29, 2024: Volkswagen Group is consistently driving its e-offensive in China for China. Volkswagen and XPENG have entered into a Master Agreement on platform and software collaboration, marking a significant milestone in their strategic partnership. In December 2023, Volkswagen completed the acquisition of shares amounting to around 4.99 per cent of the total issued and outstanding share capital of XPENG, at that time following the announcement of the partnership in July. The Master Agreement centres on the initial joint development of two mid-size Volkswagen brand vehicles, which will launch first with a SUV. This will enable the VW brand to expand its existing portfolio quickly, to reach new target customer groups in the fast-growing EV market in China. The two jointly developed e-models will be equipped with state-of-the-art software and hardware, offering Chinese customers an intuitive, connected digital experience and advanced automated driving functions. All parties are contributing their respective core competences to the joint development work.  

The agreement also paves the way for an extended and deeper strategic collaboration in the future. As part of the Master Agreement, both parties have entered into a joint sourcing program for common vehicle and platform parts used by both partners. Through this initiative and by leveraging Volkswagen Group's supply chain, the program is meant to provide cost advantages and shall further improve the economic competitiveness of the jointly developed mid-size ICVs. 

At the same time, joint purchasing activities and the use of innovative technologies in the design and engineering phase will significantly reduce development time by more than 30 percent. The Volkswagen China Technology Company (VCTC) in Hefei is acting as a central interface to ensure the best possible synergies.

Ralf Brandstätter, Board Member of Volkswagen AG for China, said: “In the world's largest and fastest-growing EV market, speed is fundamental when it comes to tapping into promising market segments. To constantly increase our local portfolio, we are expanding our own development capacities in China. Thereby, consistently following our strong ’In China, for China’ approach which focuses on the specific needs of the Chinese customers. Through the partnership with XPENG, we are not only accelerating development times, but also boosting efficiency and optimizing cost structures. This increases the economic competitiveness in a highly price sensitive market environment significantly.”

Brandstätter added: “The rapid finalisation of the Master Agreement after the strategic partnership announcement last year already shows the great potential of this collaboration. The two teams are working closely together with a clear goal: to combine the strengths of both parties to bring smart products onto the road for our customers.”    

Xiaopeng He, Chairman and CEO of XPENG, said: “The signing of the Master Agreement represents another significant milestone achieved together with our partner Volkswagen Group. There is no precedent of the strategic partnership between Volkswagen and XPENG. However, the commitment by both companies and the trust built between our R&D teams over the past eight months have made the success of our project possible. Combining Volkswagen's highly reputable vehicle development and engineering capability with XPENG's smart EV technologies, we will deliver the best smart EV products to Chinese consumers. With the long-term vision of our strategic partnership, both parties contribute their best to the partnership. We have started to realize synergies through our Joint Sourcing Program. I firmly believe there is a lot of upside potential to this partnership that we can explore.”

Stefan Mecha, CEO of the VW brand in China, said: “The Volkswagen brand is continuously expanding its range of electric cars for Chinese customers. Through the partnership with XPENG, we are gaining further momentum. Both partners contribute their respective strengths to the joint development, which enables us to supplement our existing portfolio quickly and efficiently with two China-specific vehicles – starting with a SUV. In a highly competitive environment, this is of crucial importance. My compliments to both teams. Both cars will be on the road as early as 2026  We have a strong plan in place to further develop the promising and steadily growing mid-size segment for the Volkswagen brand. This is an important milestone in the ’In China, for China’ approach and a clear commitment to our Chinese customers.”

Partnership is an important step in the Group’s ’In China, for China’ strategy

The cooperation ties in with the Group’s ’In China, for China’ strategy to address new trends in China at an early stage and leverage the growth dynamics and innovative strength of the market more effectively. In order to speed up decision-making and development processes in the region, Volkswagen is strengthening its local capacities for e-mobility as well as digitalization and autonomous driving.

To drive this strategy, Volkswagen expanded its Hefei site in east China’s Anhui Province into a state-of-the-art production, development, and innovation hub – with the Volkswagen Group China Technology Company for fully connected, intelligent electric vehicles in its centre.

At the same time, the Volkswagen Group is also focusing on partnerships with local high-tech companies. For Volkswagen Group China, high technology localization and systematic customer orientation are the key to take on a leading role in the new ICV era.

The joint development of Volkswagen and XPENG will enrich Volkswagen brand's portfolio quickly and efficiently with two China-specific vehicles – starting with a SUV