Volkswagen Group Investing $700M in Xpeng for 5% Stake, VW EV Development; Audi Jointly Developing EVs With SAIC

The Volkswagen Group is strengthening its position on the Chinese automotive market with cooperations between the VW brand and XPENG and between Audi and SAIC.

The VW brand has concluded a technological framework agreement with XPENG. The initial stage of the cooperation will provide for the joint development of two VW-brand electric models for the mid-size segment in the Chinese market. The China-specific vehicles will supplement the MEB product portfolio and are to be rolled out in 2026 in China. This is subject to the conclusion of final agreements.

As part of the close and long-term strategic cooperation, the Volkswagen Group is to invest approximately US$700 million in the Chinese manufacturer of intelligent electric cars. Volkswagen is thus acquiring 4.99% stake in XPENG at US$15 per ADS by way of a capital increase, and will hold a seat as an observer on the XPENG board of directors. The share issuance will be subject to customary closing conditions including applicable regulatory approvals.

The Volkswagen Group and XPENG each brings in highly complementary strengths into this long-term strategic partnership. We will share Smart EV technologies and world-class design and engineering capability with each other and learn from each other. Since the founding of XPENG, we have been developing full-stack technologies from EV platform to connectivity and ADAS software in house. We are excited about the opportunity to contribute our expertise to the strategic partnership and create value for XPENG and our shareholders.

—He Xiaopeng, Chairman and CEO of XPENG

The VW brand has a long-term electrification-strategy for the Chinese market. In doing so, we continue to consistently rely on our high-performance MEB and SSP architectures. With the strong growth of the electric segment, there are now further market opportunities that we want to exploit. We are also focusing on joint development projects with strong local partners in order to rapidly expand our product portfolio. Together with XPENG, we aim to put two additional fully connected electric vehicles on the road from early 2026 onwards, thus opening up new customer groups for the VW brand.

—Stefan Mecha, CEO VW Brand Region China

Audi has signed a strategic memorandum with its Chinese joint venture partner SAIC to further expand existing cooperation. Joint development activities are to extend the portfolio of fully connected electric vehicles on offer in the premium segment swiftly and efficiently. It is planned to start with electric models in a segment where Audi does not as yet have a presence in China.

The jointly developed e-models are to be equipped with advanced software and hardware, in order to offer Chinese customers an intuitive, connected digital experience. All parties are contributing their respective core competences to the development effort.

Audi has strong plan electrification plan for the world’s largest automotive market. This step marks the systematic continuation of this plan. Following on from the first two successful years of cooperation, we are now strengthening our long-term commitment to SAIC. Our aim is to jointly develop next-generation premium ICV swiftly and efficiently ‘in China for China’. Even closer cooperation with a local partner such as SAIC supports Audi’s ambition to create a premium market segment for all-electric and fully connected cars in China.

—Jürgen Rittersberger, Member of the Board of Management of AUDI AG responsible for Finance, IT and Legal Affairs

SAIC and Audi have signed a memorandum of understanding. Both parties will accelerate SAIC Audi’s electrification of the model portfolio development, leveraging the advantages of both sides to meet the needs of Chinese customers for premium electric intelligent connected vehicles. With SAIC contributing technology, and actively participating in the joint product development, together we are opening a new chapter in joint venture cooperation, aiming to create a win-win situation.

—Zu Sijie, Vice President and Chief Engineer of SAIC Group

Both agreements also envisage a planned, future joint development of new local platforms for the next generation of intelligent, fully connected vehicles (ICV). The partnerships aim to swiftly expand the Group’s product range with further models from China for China in particularly promising customer and market segments. The details of cooperation on future e-platforms are the subject of further negotiations between the partners.

Local partnerships are an important building block in the Volkswagen Group’s ‘in China for China’ strategy. We are now accelerating the expansion of our local electric portfolio and at the same time preparing for the next innovation step. With XPENG, we now have another strong partner that is one of the leading manufacturers in China in key technology areas.In a competitive and dynamic market environment, we are leveraging the strengths of Volkswagen and our partners to create synergies to bring additional products to market faster. In doing so, we focus on the specific needs of our customers in China. At the same time, we want to significantly optimize development and procurement costs.

—Ralf Brandstätter, Volkswagen AG Board Member for China

Volkswagen Group (China) Technology Company assumes development responsibility for new Volkswagen models. The recently founded Volkswagen Group China Technology Company (VCTC) is the development partner for XPENG. The new development, innovation and procurement center is the Group’s largest development location outside Wolfsburg. Going forward, this is where more than 2,000 development and procurement experts will work on new intelligent, fully connected electric vehicles.

Optimizing development and procurement volumes generates significant synergy potential with cost advantages compared with current vehicle projects, Volkswagen said.

The cooperations tie in with the Group’s “in China for China” strategy to address market-defining trends in China at an early stage and leverage the growth dynamics and innovative strength of the Chinese 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 this end, Volkswagen is expanding its Hefei plant in east China’s Anhui Province into a state-of-the-art production, development and innovation hub. Production at Volkswagen Anhui’s new vehicle plant will commence this year. VW Anhui Component Company is building a manufacturing facility for high-voltage battery systems in Hefei. Furthermore, Volkswagen Group China Technology Company is setting up a development and procurement center for fully connected, intelligent electric vehicles in Hefei.

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 playing a leading role in the new era of intelligent connected vehicles (ICV).