Xpeng And Volkswagen Partner For New Project House Focused On EV Architecture

In a significant move, Chinese electric vehicle (EV) maker Xpeng Inc (NYSE:XPEV) and German auto giant Volkswagen AG (OTC:VWAGY) have announced a partnership to expedite the development of a new EV architecture.

What Happened: As per a Reuters report on Sunday, Xpeng and Volkswagen have set up project houses in Guangzhou and Hefei, China. These will serve as joint workspaces for engineers from both companies to fast-track the creation of a new EV architecture.

The collaboration aims to start production of the new architecture, a layout of electronic components, modules, and network within a vehicle, within two years. “From 2026, all electric vehicles of the Volkswagen brand in China will be equipped with this very powerful and efficient architecture,” stated Ralf Brandstätter, a board member of Volkswagen AG for China.

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The project houses are part of a deal between Xpeng and Volkswagen, where the latter intends to use the new architecture to manufacture more affordable EVs in its largest market. This comes after a partnership formed last year when Volkswagen acquired a 4.99% stake in Xpeng for roughly $700 million, with plans to jointly launch two Volkswagen-branded EV models by 2026.

Why It Matters: This collaboration comes at a time when Chinese EV stocks, including Xpeng, are facing a downturn due to the Biden administration’s potential imposition of chip sale restrictions on China, escalating geopolitical tensions between the U.S. and China. As per a Benzinga report, XPEV stock has lost over 39% in the past year.

Furthermore, foreign automakers are struggling to compete in China’s rapidly growing EV market, despite new tariffs on Chinese EVs. According to a study by AlixPartners, foreign car companies are lagging in China’s EV market, which accounts for over 40% of new passenger cars sold in the country.

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This story was generated using Benzinga Neuro and edited by Shivdeep Dhaliwal