Shares of XPeng Inc. (NYSE: XPEV) skyrocketed by 26.69% on Wednesday following the announcement of a long-term strategic partnership with the automotive giant Volkswagen Group.
Volkswagen Group plans to invest approximately $700 million in XPeng, securing a 4.99% stake in the EV company.
Volkswagen’s collaboration with Xpeng aims to develop two new models targeting the middle-class segment in China. These models will bear the iconic VW logo but will incorporate XPeng’s know-how in software and autonomous driving technology.
The new models are expected to hit the market in 2026. These vehicles will effectively fill a gap in Volkswagen’s product lineup in the highly competitive Chinese market. The demand for “new energy vehicles” has surged beyond expectations in China, and Volkswagen has been trailing behind local competitors and Tesla in this fast-evolving sector.
Moreover, this strategic alliance is poised to bolster Volkswagen’s position in China, easing investor pressure to ramp up EV sales and address labor rights concerns in the Xinjiang region, where it shares a plant with SAIC.
Volkswagen’s China Chief, Ralf Brandstaetter, has consistently emphasized the importance of collaborating with local partners to successfully execute the company’s China strategy. This partnership with Xpeng is part of Volkswagen’s collaborations with Chinese firms, including battery maker Gotion and technology firm Horizon Robotics.
This strategic move is expected to bolster Xpeng’s reputation and platform, providing them access to Volkswagen’s supply chain and sourcing capabilities, according to Daniel Roeska of Bernstein Research.
In further developments, Volkswagen revealed plans for further cooperation between its subsidiary, Audi, and the Chinese heavyweight SAIC. Although specific models and a joint platform timeline were not disclosed, this move is poised to strengthen Audi’s position in China’s electric vehicle market, where its performance has been lackluster until now.
