Xpeng Motors Stock Surges 40% After Reaching Agreement with Volkswagen

On July 26, Volkswagen and Xpeng Motors reached a technological framework agreement. In the early stage of cooperation, the two parties plan to jointly develop two Volkswagen brand electric models for the Chinese midsize car market. These two new cars exclusive to the Chinese market will supplement the product portfolio based on the MEB platform, which is planned to go to market in 2026.

As a part of this close and long-term strategic cooperation, the parties simultaneously entered into a share purchase agreement for the issuance of Class A ordinary shares about 4.99% of XPENG’s outstanding share capital as of immediately after the closing to Volkswagen Group at US$15 per American depositary share, for a total consideration of approximately US$700 million. After the transaction is completed, Volkswagen will gain an observer seat on the Xpeng board.

In addition, Volkswagen Group revealed that the newly established Volkswagen (China) Technology Company (VCTC) will be a partner of Xpeng in development.

XPeng’s stock surged almost 40% in today’s trading, putting them on track for the highest close since Aug. 22, 2022.

Ralf Brandstätter, Volkswagen AG Board Member for China, commented, “Local partnerships are a key building block in the Volkswagen Group’s ‘in China for China’ strategy. Together with XPENG, we are now forming a strong cooperation and speeding up the expansion of our local electric portfolio and at the same time preparing ourselves for the next step change in innovation. In an intensely competitive and dynamic market environment we are leveraging the partners’ core competences, thus creating synergies to bring additional products to market faster – aligned with the special wishes of Chinese customers. At the same time, we can significantly optimize development and procurement costs.”

“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,” said Mr. Xiaopeng He, Chairman and CEO of XPENG. “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.”

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Meanwhile, Audi, under Volkswagen Group, signed a strategic memorandum with its Chinese joint venture partner, SAIC Group, to further deepen the existing cooperation. The two parties will expand their high-end intelligent connected electric vehicle portfolio rapidly and efficiently through joint development. As the first step of the plan, Audi will enter previously uncovered segments in China by launching new electric models.

Some believe that the reason for the consecutive cooperation of the two brands is that the results of Volkswagen Group’s electrification transformation are not significant.

Volkswagen Group’s data shows that in the first half of this year, the group’s global pure electric vehicle deliveries increased by 48% to 321,600 units, with the proportion in total deliveries increasing from 5.6% in the same period last year to 7.4%. Among them, Volkswagen ID.4(including ID.5) and Volkswagen ID.3 were the best-selling pure electric models in the Volkswagen Group in the first half of the year, with sales of 101,200 units and 49,800 units respectively.

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In particular market areas, the European market has become the main market for Volkswagen Group’s pure electric vehicle sales, with deliveries increasing by 68% in the first half of the year, reaching 217,100 units, accounting for 68% of Volkswagen Group’s pure electric vehicle total sales. The growth rate of Volkswagen Group’s pure electric vehicles in the US market is 76%, reaching 29,800 units.

Contrastingly, in the Chinese market, where demand for electric cars is strong, the delivery volume of Volkswagen Group’s pure electric cars actually fell by about 2% compared to the previous year, with only 62,400 units, and China only accounted for 19% of Volkswagen Group’s pure electric vehicle sales.

Some believe that with more and more automakers cut prices in the Chinese market, and the rapid development of Chinese new energy vehicle brands, the dominant position established by Volkswagen Group in the internal combustion engine era is threatened.