VW with Xpeng to Build a Low-Cost EV Platform

Volkswagen and Xpeng are working together to develop a new electric vehicle platform, which the German manufacturer believes would lower production costs and help to recover its lost share in the Chinese market.

According to executives in Wolfsburg, the new China Electrical Architecture (CEA), a collaborative effort between Xpeng and VW’s subsidiaries, Volkswagen China Technology Company (VCTC) and CARIAD China, is expected to reduce costs by up to 40% when compared to the current MEB platform used in vehicles like the ID.4 and make VW’s EVs competitively priced with those from Chinese brands.

Related: Volkswagen Considers NIO, XPENG, BYD and CATL of China as Direct Competitors

The cost saving comes in part from a 30% reduction in the number of electronic control units. A centralized computer system and zonal structure of sub-systems also make it easy for VW to apply over-air updates and implement new technologies like autonomous driving features that can be continually and seamlessly updated.

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In 2026, Volkswagen plans to introduce the platform to the Chinese market with two mid-range cars, the first of which will be an SUV. However, in the same year, VW will also launch a second platform that is exclusive to China. It was created in collaboration with SAIC-Volkswagen, FAW-Volkswagen, and Volkswagen China Technology Company (VCTC). The four smaller VW-branded models that will first come from this China Main Platform (CMP) architecture are intended to be more reasonably priced vehicles than those that will be housed in the CEA.

Related: Volkswagen to Invest $700 Million in Xpeng of China

VW and Xpeng have been in the news together before. As part of an attempt to turn around its faltering fortunes in China, the German manufacturer paid around $700 million last year to purchase a 4.99% stake in the Chinese company. For many years, VW dominated the market there and was the first Western company to take advantage of the sales and manufacturing opportunities the nation provided. However, in recent years, it has faced challenges from more capable and competitively priced local competitors. VW’s China boss Ralf Brandstaetter pulled no punches in explaining why the automaker badly needs this deal, he said:

“Competition is very fierce, and we have to adapt our cost structure to be competitive in this environment.”

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