The Volkswagen Group is bolstering its foothold in the Chinese automotive market through strategic partnerships with Xpeng and SAIC. The move is part of the Group’s local electrification strategy, aiming to tap into new customer and market segments in China’s rapidly growing e-mobility market.
Volkswagen has inked a technological framework agreement with Xpeng. The initial phase of the partnership will focus on the joint development of two Volkswagen electric models for the mid-size segment in the Chinese market. These China-specific vehicles, set to be launched in 2026, will supplement the MEB product portfolio, subject to the finalization of agreements.
As part of the strategic cooperation, Volkswagen Group will invest approximately US$700 million in Xpeng, a Chinese manufacturer of electric cars. By way of a capital increase, Volkswagen will acquire a 4.99 percent stake in Xpeng at US$15 per ADS, and will hold a seat as an observer on the Xpeng board of directors. The share issuance is subject to customary closing conditions including applicable regulatory approvals.
Jürgen Rittersberger, Member of the Board of Management of AUDI AG responsible for Finance, IT and Legal Affairs, highlighted Audi’s strong electrification plan for the world’s largest automotive market. Zu Sijie, Vice President and Chief Engineer of SAIC Group, expressed optimism about the cooperation, stating that both parties will accelerate SAIC Audi’s electrification of the model portfolio development.
Audi has signed a strategic memorandum with its Chinese joint venture partner SAIC to further expand existing cooperation. The joint development activities aim to swiftly and efficiently extend the portfolio of fully connected electric vehicles in the premium segment. The jointly developed e-models will be equipped with state-of-the-art software and hardware to offer Chinese customers an intuitive, connected digital experience.
The recently established Volkswagen Group China Technology Company (VCTC) will serve as the development partner for Xpeng. The new development, innovation, and procurement center is the Group’s largest development location outside Wolfsburg. Over 2,000 development and procurement experts will work on new intelligent, fully connected electric vehicles at this location.
He Xiaopeng, Chairman and CEO of Xpeng, expressed excitement about the partnership, stating that both Volkswagen Group and Xpeng bring highly complementary strengths into this long-term strategic partnership. Stefan Mecha, CEO VW Brand Region China, echoed these sentiments, emphasizing the VW brand’s long-term electrification strategy for the Chinese market.
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. 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.
Good luck Volkswagen with this venture, but 2026 seems far away and other EV makers in China have already got off to a head start.
