Volkswagen Invests in Xpeng to Boost Presence in China's Electric Vehicle Market

Volkswagen Group has announced plans to invest in one of China's fastest-growing electric car (EV) makers, Xpeng, in a joint effort to develop vehicles powered by non-fossil fuels. The German carmaker will invest approximately US$700 million, acquiring a 4.99% stake in Xpeng and securing an observer's board seat in the Chinese company.

According to Ralf Brandsatter, Volkswagen's China CEO, the collaboration aims to expand the company's position in China's booming EV market by tapping into new customer segments and introducing intelligent, fully connected electric vehicles (ICV) more quickly. Brandsatter highlighted the significance of the Chinese market, where over 30% of newly registered vehicles are already electrified, and this figure is expected to reach 50% by 2025. As such, Volkswagen sees substantial growth potential and intends to seize this opportunity.

The partnership will involve joint development efforts, and two Volkswagen-branded midsize EVs are scheduled to debut in China by 2026, as outlined in their technological framework agreement. These models will target China's middle-class segment and aim to cater to consumer preferences in the rapidly expanding EV market.

Volkswagen's investment in Xpeng reflects the company's determination to bolster its position in China's electric vehicle industry. While Volkswagen is the leading car brand in terms of overall sales in China, it has faced stiff competition from nimbler EV start-ups like Xpeng and Nio. To keep pace with its rivals, Volkswagen has been forming partnerships with various Chinese firms, including artificial intelligence chip designer Horizon Robotics, battery producer Gotion High-tech, and intelligent car operating system products provider Thundersoft, to enhance its EV development capabilities.

Xpeng's share price surged significantly following the announcement of Volkswagen's investment. Alibaba Group Holding, which owns a stake in Xpeng, further adds to the significance of this collaboration.

Meanwhile, Volkswagen's Audi brand also solidified its alliance with Shanghai-based SAIC Motor to swiftly and efficiently expand its portfolio of fully connected electric vehicles in the premium segment.

The overall car market in China has seen steady growth, with EVs driving much of the expansion. Sales of pure electric and plug-in hybrid cars have increased by 25% in the first half of the year compared to the same period last year, accounting for 32.4% of total vehicle sales. China's substantial investment in a nationwide charging infrastructure has facilitated the rapid adoption of EVs, leading to projections that three out of every five new vehicles on China's roads by 2030 will be battery-powered.

For Volkswagen, the strategic investment in Xpeng and the alliance with SAIC Motor signal the company's commitment to strengthening its position in the highly competitive Chinese EV market. By leveraging the expertise of local partners and harnessing the growing demand for electric mobility, Volkswagen aims to accelerate its growth and maintain its relevance in one of the world's most significant EV markets.

By fLEXI tEAM