German automaker Volkswagen and its Chinese electric vehicle (EV) partner XPeng have revealed that the first car they plan to develop together will be an SUV for which they will jointly source parts. The two parties have signed a master agreement for platform and software collaboration. In a joint statement, they said that they will start a joint sourcing program for platform and vehicle parts used by both partners, leveraging scale to reduce cost.
In July last year, Volkswagen had said that it would buy 4.99% of Xpeng for around USD 700 million with plans to jointly launch two EV models by 2026. The purchase was completed in December. The latest announcement marks a step forward in the partnership. The aim behind this collaboration is to regain market share in China which was lost to local rivals.
The company believes that economies of scale from joint purchasing, combined with innovations in design and engineering phases, will slash development time by more than 30%. “In the world’s largest and fastest growing EV market, speed is fundamental,” Volkswagen Group board member and China chief Ralf Brandstatter said. Reuters reported.
In late 2022, the German automaker ceded its title of best-selling car brand in China to local EV manufacturer BYD. The increasing competition with EV makers has been weighing on the storied automaker’s reliance on petrol vehicles whose sales have been declining.
The cars produced under the partnership will carry the Volkswagen logo but feature a jointly developed platform based on the G9 ‘Edward’ technology. Last year, the company said that it would develop another manufacturing platform in China derived from its modular ‘MEB’ platform for entry-level EVs and use more local components to lower cost. Additionally, Volkswagen is also investing around 1 billion euros (USD 1.08 billion) in a new EV development and procurement centre in Hefei city.
While many EV makers globally are racing to cut costs, Xpeng has announced its plan to hire 4,000 people this year and invest millions of dollars in artificial intelligence (AI) in order to tackle “bloody sea” of competition.