Amidst intense competition, legacy car manufacturers have no time to spare for their “soul”. Huawei’s car BU has rapidly gained traction in the industry with its smart driving capabilities, while the collaboration between XPeng Motors and Volkswagen is also deepening.
On July 18, hundreds of Volkswagen engineers swarmed into XPeng Motors’ headquarters, sparking widespread market discussion. Last July, Volkswagen invested $700 million in XPeng Motors, acquiring a 4.99% stake and an observer seat on the board. The two companies are developing two models based on XPeng’s smart technology platform, set to be released in 2026. Since then, they have had numerous interactions.
However, this time it wasn’t just a routine technical exchange. According to insiders, the hundreds of Volkswagen employees came to XPeng for interviews and training as part of their previous cooperation on the electronic and electrical architecture project, CEA. In April 2024, XPeng and Volkswagen expanded their collaboration to the electronic and electrical architecture field, giving rise to the CEA project.
According to 36Kr, after Volkswagen personnel moved into XPeng, XPeng might further take over almost all of Volkswagen China’s electronic and electrical architecture for electric models.
The electronic and electrical architecture (EE architecture) is the foundation of automotive intelligence, digitalization, and connectivity, and a key to supporting high-level autonomous driving. Simply put, it’s the “soul” of smart cars.
Photos obtained by 36Kr show that XPeng Motors has set up an independent office area for Volkswagen employees at their Guangzhou headquarters, with a “VW project” sign and “VW” stickers on employees’ computer screens. Some employees have been dispatched from Volkswagen’s headquarters in Germany for three years of learning.
More importantly, the collaboration does not stop here. Insiders revealed that XPeng and Volkswagen’s cooperation will extend beyond the China-focused CMP platform to Volkswagen’s global electric vehicle platform, MEB.
The significant progression in cooperation was driven by Volkswagen’s recognition of XPeng’s car-making speed. An insider revealed that a white body of a jointly developed model has recently rolled off the production line. Typically, it takes about a year from the white body to mass production, suggesting that the jointly developed car could be launched as early as 2025, a year ahead of schedule.
When approached for comments, both XPeng and Volkswagen declined to respond, with XPeng stating that detailed information about their further cooperation will be disclosed next week.
Volkswagen has long been at the top of global car sales, and a comprehensive car development platform is indispensable. In the era of internal combustion engines, Volkswagen had the MQB platform, while in the electric vehicle era, they introduced the MEB platform.
If XPeng secures collaboration based on Volkswagen’s MEB platform, it would signify closer ties between the two, and for XPeng, leveraging Volkswagen would open up larger markets.
XPeng’s pace satisfies Volkswagen In July 2023, after Volkswagen invested in XPeng, both parties agreed to jointly develop two Volkswagen-branded electric vehicle models based on XPeng’s G9 platform, smart cockpit, and ADAS software, aiming for a 2026 market delivery.
36Kr has learned that these two cars, internally codenamed V01 and V02, are under intensive development and will be produced at Volkswagen Anhui (a joint venture between Volkswagen Group and JAC Motors). One of them is a mid-size SUV similar to the XPeng G9.
Since last July, XPeng and Volkswagen’s cooperation has intensified. On February 29, this year, XPeng and Volkswagen signed a joint development agreement for shared components for co-developed models and platforms. XPeng CEO He Xiaopeng mentioned that Volkswagen dismantled and analyzed an XPeng G9, finding some parts were 25% more expensive. Joint procurement could significantly reduce costs for both companies’ models.
On April 17, XPeng and Volkswagen agreed on the electronic and electrical architecture. Their cooperation evolved from joint vehicle development to the CEA level.
The CEA architecture, co-developed by XPeng, Volkswagen, and Volkswagen’s software subsidiary CARIAD China, significantly reduces the complexity of in-car intelligent electronic control systems by cutting the number of controllers by 30%. It also supports OTA upgrades, allowing continuous updates for features like autonomous driving.
The CEA architecture will not only be installed in the two co-developed models but also integrated into Volkswagen’s CMP platform for the Chinese market, aiming to develop four compact entry-level electric models, with the first model launching in 2026.
CMP, co-developed by Volkswagen China Tech, SAIC Volkswagen, and FAW Volkswagen, means XPeng’s EE architecture will be utilized across Volkswagen’s electric vehicle platforms in China.
Thus, leveraging the CEA architecture, XPeng can influence Volkswagen’s entire electric vehicle platform in China.
A partnership in the electrification struggle The collaboration between Volkswagen and XPeng stems from a common goal—electrification.
Volkswagen has struggled to produce mainstream competitive smart electric cars despite significant investments, while XPeng, with its advanced smart and electric technologies, still grapples with low sales.
Therefore, Volkswagen’s money and XPeng’s technology complement each other perfectly.
In Q1 this year, XPeng delivered 21,800 electric cars. Although sales were not impressive, revenue reached 6.55 billion yuan, up 62.3% year-over-year, with a gross margin of 12.9%, an increase of 11.2% year-over-year.
A closer look reveals that XPeng generated 5.54 billion yuan from car sales, while the remaining 1 billion yuan came from services and other income, including revenue from its cooperation with Volkswagen.
An investor told 36Kr that XPeng recognized about 400 million yuan in revenue from Volkswagen in Q1. XPeng’s Vice Chairman and President Brian Gu also mentioned that this revenue would be recurring, with revenue from the EE architecture cooperation with Volkswagen starting to be recognized in the second half of the year, and the revenue for the coming quarters will exceed that of the first quarter.
Clearly, once business with Volkswagen opens up, XPeng will secure long-term technical revenue. There’s curiosity whether XPeng will replicate the “Volkswagen story” with other traditional car manufacturers undergoing transformation. However, XPeng has no intention of rapidly expanding this model, with CEO He Xiaopeng repeatedly stating in public that they won’t quickly promote this cooperation model.
For Volkswagen, this reassures their continued investment in XPeng. Moreover, buying time through XPeng’s technological achievements is the fundamental drive behind this cooperation.
In the Chinese market, Volkswagen has over 50 million Chinese car owners, 3,500 dealers, and 39 car factories. In 2023, sales in China accounted for about 35% of Volkswagen’s global sales.
The significance of the Chinese market to Volkswagen is self-evident. Over the past few years, Volkswagen’s electrification strategy has mainly focused on its global MEB platform.
However, the MEB development pace struggles to keep up with the Chinese market, where product development cycles for MEB platform products are 48 months, while Chinese car manufacturers can develop a new product in as little as 14 months.
Moreover, the platform remains at the 400V electrical system level, while Chinese car manufacturers have moved into the 800V era.
Volkswagen Group CEO Oliver Blume also admitted: “The Chinese market is like a gym, you can’t keep up without high intensity.”
Volkswagen has recognized the crisis. At the Beijing Auto Show this year, Volkswagen set a clear acceleration target: launching a new generation of cars every three years, upgrading electronic architecture every two years, and monthly OTA upgrades.
XPeng’s participation provides the technical support for Volkswagen’s goals, allowing them to catch up with mainstream market competition faster.
It’s important to note that beyond this mutually beneficial cooperation, there is another variable—XPeng’s own sales. In the first half of the year, XPeng’s monthly sales hovered around 10,000 units, far behind competitors with monthly sales of 20,000 to 30,000 units. XPeng plans to launch the MONA 03, a model priced around 100,000 yuan, and the new coupe model P7+.
Clearly, XPeng hopes to strengthen its other leg while reinforcing cooperation with Volkswagen.
Credit: 36Kr
