Volkswagen and XPeng are getting closer

Since Xiaopeng attracted the attention of Volkswagen Group last year, the relationship between the two parties has been warming up. On April 17th, Xiaopeng announced that it will cooperate with Volkswagen Group in the field of Electrical/Electronic Architecture (EEA) technology, jointly developing a brand-new EEA architecture. According to the plan, starting from 2026, this architecture will be applied to all electric vehicles produced by Volkswagen's brand in China, initially covering 4 entry-level electric vehicles built on the CMP platform. This marks the third collaboration between Volkswagen and Xiaopeng. From the announcement of a 5 billion RMB investment in Xiaopeng last July and a "technological alliance", to the joint procurement that started in February this year, and now the joint development at the architecture level, the depth of cooperation has been gradually deepening. Volkswagen's goal is clear: to launch planned electric vehicle models in China by 2026 and accelerate the iteration speed of its platform in China. Stephan Wöllenstein, Chairman of Volkswagen China, stated that in order to maintain its position in the rapidly changing Chinese market, Volkswagen must speed up. He revealed that Volkswagen China no longer needs to seek approval from the headquarters in Germany for research and development. With advanced driver assistance functions becoming standard, Volkswagen needs to catch up quickly. Coupled with the intensifying competition from new forces, the speed of iteration has become a key factor in consolidating its position in the industry. "In the Chinese market, vehicle models are updated every three years, architectures are upgraded every two years, and vehicles receive OTA updates every month. We must keep up with the pace," said Stephan Wöllenstein. Volkswagen China's choice of Xiaopeng is also based on this consideration. Xiaopeng's EEA architecture allows the XNGP intelligent driving system, vehicle networking operating system, and underlying hardware and vehicle platform to be decoupled, supporting whole-vehicle OTA updates. To ensure the advancement of Volkswagen's research and development strategy in China, on April 11th, Volkswagen China also invested 2.5 billion euros (approximately 19.2 billion RMB) with Xiaopeng to expand their production and innovation center in Hefei, strengthening local research and development. In the future, the two B-segment models developed through their cooperation will also be produced there. It is evident that Volkswagen is urgently trying to regain its position in the Chinese market. For Xiaopeng, this partnership is a perfect match. Xiaopeng needs to provide consumers and investors with a visible story to boost confidence in the company. By 2024, Xiaopeng's sales volume experienced a decline, selling 13,000 fewer units in the first quarter compared to last year, a decrease of nearly 40%. In He Xiaopeng's plan, there will be 30 new models launched in the next three years, with 3 models set to be released this year. To accelerate through this period of pain, He Xiaopeng has chosen to invest against the trend, heavily focusing on technology, products, and organizational structure, which undoubtedly requires more abundant support. The cooperation with Volkswagen has become a new point of profit growth for Xiaopeng and a tool to hedge against fluctuations. He Xiaopeng pointed out that this is a strategic cooperation based on broader considerations. He expects Xiaopeng to start generating some platform and software service revenue this year, coupled with the joint procurement with Volkswagen, which will improve Xiaopeng's gross profit margin to a certain extent and provide greater room for price adjustments for both parties' models With Volkswagen as a "backing", XPeng has also broken away from the previous single business model of "making cars", giving investors more confidence. On April 18th, XPeng's Hong Kong stock rose by 3.19% in a single day, with a market value reaching HKD 55 billion. However, after strengthening its safety net, the key for XPeng to truly become a giant "masterstroke" lies in whether it can leverage the advantages of cooperation to create more popular products and win consumers' votes