Forty years ago, Volkswagen became associated with the Chinese people in Shanghai, and brought the charm of "four-wheeled travel" to the Chinese people who were still in the "two-wheeled world" at that time with its world-leading automobile manufacturing technology. Over the years, Volkswagen has conquered more than 50 million Chinese users by relying on rigorous and reliable automotive products.
Forty years later, in Guangzhou, Volkswagen set out again, hoping to impress the Chinese family who had been "spoiled" by local Chinese brands in the era of intelligence with new energy vehicles that were more in line with the needs of Chinese users.
The difference is that this time, Volkswagen decided to clasp the palm of its hand with Xpeng.
On July 22, Volkswagen Group and Xpeng Motors signed a strategic cooperation and joint development agreement on electronic and electrical architecture technology to further expand cooperation in the field of platforms and software. The CEA E/E architecture developed by the two companies will facilitate the transformation of the Volkswagen brand into "software-defined vehicles" in China.
It is reported that from 2026, CEA will be installed on domestically produced Volkswagen brand models based on the CMP and MEB platforms.
"In 2026, we will launch a powerful new E/E architecture, CEA. The CEA architecture is a comprehensive technology solution specifically designed for the Chinese market and will be applied to the Volkswagen brand's locally produced BEVs based on the CMP and MEB platforms.
From a technical point of view, the CEA architecture offers significant advantages over current E/E architectures: three highly integrated zone controllers will replace a large number of electronic control units, while improving computing performance and safety.
In addition, thanks to an efficient central computing platform and powerful computing power, complex functions such as advanced autonomous driving assistance can be integrated into the architecture more quickly and easily.
In the new energy era, the digitalization and intelligence level of automobiles has become an important bargaining chip for the competition between car companies, and the electronic and electrical architecture, as the "soul" of automotive digitalization, plays a decisive role in the digital transformation of car companies. Volkswagen's in-depth cooperation with Xpeng Motors on electronic and electrical architecture technology is quite a bit of a "rival" to the soul.
So, why did Volkswagen make such a choice? What will Volkswagen get after Volkswagen and Xpeng experience a relationship from 1 VS 1 to 1+1? What will Xpeng get?
The masses trade their souls for speed
The cooperation between Volkswagen and Xpeng Motors did not start from this time, on the contrary, this cooperation on electronic and electrical architecture is more like a deepening of the previous cooperation.
In July 2023, Volkswagen and Xpeng signed a framework agreement on strategic technology cooperation, and at the same time, Volkswagen Group acquired a 4.99% stake in Xpeng Motors. In December 2023, the two sides reached a strategic technical cooperation framework agreement. In March 2024, a strategic technical cooperation joint development agreement was concluded and a joint procurement plan was concluded. In April 2024, the company will jointly develop the CEA architecture, which will be used in Volkswagen-branded electric vehicles produced in China in 2026. In July 2024, Volkswagen employees entered the Guangzhou Xpeng office.
From the cooperation agreement and acquisition investment last year to the deepening of the electronic and electrical architecture cooperation this year, the two sides only took one year, and the core behind such a fast speed lies in Volkswagen's correct understanding of the development speed of China's new energy vehicles and the awe generated on this basis.
According to data from the China Association of Automobile Manufacturers, in 2022, the production and sales of new energy vehicles in mainland China will be 7.058 million and 6.887 million respectively, and in 2023, these two sets of figures will reach 9.587 million and 9.495 million respectively, an increase of 35.8% and 37.9% year-on-year, respectively. Judging from the production and sales volume in the first half of 2024, this set of figures will continue to maintain rapid growth.
China's new energy vehicles exude vigorous vitality, but Volkswagen, which has been deeply involved in China for 40 years, has encountered an unprecedented crisis. Although Volkswagen began its subversive electrification transformation many years ago, from the development of pure electric platforms to the emergence of a number of pure electric vehicles, a lot of work has been done, but the final effect has not caused waves. On the contrary, the Volkswagen ID. series models have a low degree of intelligence and frequent software problems, and now they have to rely on significant price cuts in exchange for the market.
Volkswagen, which dominates China in the fuel era, can't run in the new energy era?
To put it simply, in addition to the various restrictions such as the elephant turning, Volkswagen, like other overseas brands, was too slow to respond to the new consumer demand in the new energy era in the early stage of the development of new energy vehicles.
For example, six years after Li Auto began to build color TVs and sofas in the cockpit of the first model, Ideal ONE, Volkswagen replaced the new Magotan with a larger size of the car screen and co-pilot entertainment screen for the first time. In the past six years, almost all local brands have already made refrigerators, color TVs, and sofas necessary for new models, and users have long been accustomed to taking these as the evaluation criteria for whether a car is smart or not.
There are new technologies in the new forces, and there are new ways to play under the new technologies. Technological change is no longer measured in years, as in the fuel era, but in months or even weeks. A very intuitive example is that when China's new power is not in the climate, no car company will release the sales data of the previous month on the first day of each month.
Sales are competing on a monthly basis, and technology has to be updated on a monthly basis. Borui Wu, Chief Technology Officer of Volkswagen Group China and CEO of Volkswagen (China) Technology Co., Ltd. (VCTC), also said: "In a highly competitive market environment, speed is crucial for R&D. ”
Only with technology can there be a market, and only with a market can there be a way out. Because of this, the fastest way for Volkswagen to catch up is to find local brands to cooperate with existing mature technologies to quickly meet the needs of Chinese consumers.
Why Xpeng?
It can only be Xiaopeng.
Since the beginning of China's development of new energy, the local new power enterprises that have entered the game, only three "Wei Xiaoli" can survive and develop well. For Volkswagen, there are many requirements for choosing partners, first of all, it needs to be able to build cars independently, and the company has a certain dependence on the capital market, and at the same time, it has to understand the domestic market demand, and it also has technical accumulation in intelligent cockpit and intelligent driving.
There are only these three companies that can meet the above needs. However, so far, Ideal still needs to rely on range extension technology in exchange for market share, so it is not in line with the all-in pure electric Volkswagen. Although NIO's models are all purely electric, their positioning is more high-end, emphasizing service-oriented, which is not quite in line with Volkswagen's existing needs. From the day of its birth, Xiaopeng Motors has shown the temperament of technical control and science and engineering manhood, and currently has great advantages in intelligent cockpit, intelligent driving assistance, and three-electric technology.
Therefore, Xpeng has become the best choice for Volkswagen to make great strides in the transformation to electrification in the Chinese market.
So, after the cooperation, Volkswagen will get more localized and rapid development, and what can Xpeng Motors get?
Xpeng trades technology for the future
For the current Xpeng, the annual investment in intelligent driving is 3.5 billion yuan, and the annual investment in the entire R&D is also nearly 6 billion yuan, as of 2023, it has a total of 2,683 patents, and has also made breakthroughs in intelligent driving, electric drive systems, intelligent cockpits, charging technology, etc. Looking at the domestic new energy vehicle market, Xpeng Motors firmly grasps the first echelon at the technical level.
However, Xpeng Motors, which is a leader in technology, also suffers.
The sales of star models are less than expected, which is the most direct problem in front of Xiaopeng. According to the new car delivery data released by Xpeng Motors in June 2024 and the first half of the year, in June this year, Xpeng Motors delivered a total of 10,668 new vehicles, a year-on-year increase of 24% and a month-on-month increase of 5%. In the first half of this year, Xpeng delivered a total of 52,028 smart electric vehicles, a year-on-year increase of 26%, but only completed 18.6% of the annual target.
Sales are less than expected, and R&D investment continues to grow, making it difficult for Xpeng's revenue to cover the cost of R&D investment in the early stage, which will also form a vicious circle for Xpeng's financial situation.
However, this in-depth cooperation with Volkswagen will effectively solve the current financial problems facing Xpeng Motors. First of all, Xpeng Motors will continue to receive financial support from Volkswagen for a long time to come, which will effectively improve the current financial loss situation of Xpeng Motors.
Secondly, under the joint procurement of Xpeng and Volkswagen, Xpeng Motors can have a higher voice in the supply chain system, and the production and manufacturing costs of both parties under the coordinated development will be further reduced; Thirdly, through joint technology research and development, Xpeng's "technology realization" will be further accelerated; Finally, under the in-depth cooperation, Xpeng Motors can also explore new technologies and new ideas that adapt to the market in the research and development process, so as to seize the opportunity in the future market competition.
In addition to solving financial problems, the cooperation between Xpeng and Volkswagen is bound to improve the brand influence and brand image of Xpeng Motors at home and abroad, thereby benefiting the performance of Xpeng Motors in the capital market.
In China's new energy vehicle market, it is not only Xpeng and Volkswagen that have cooperated with local brands and international brands, but also Stellantis, SAIC and Audi, Geely and Renault. More and more foreign car companies choose to cooperate with domestic car companies, not only the vast market space in China, but more importantly, the technical strength and market experience accumulated by China's new energy vehicles that have overtaken in corners over the years.
2026 will be the landing node of the first cooperative model between Xpeng and Volkswagen. We have reason to believe that under Volkswagen's strict quality management system and the integration of Xpeng's advanced and avant-garde technical blood, this new model is bound to cause a storm in the domestic new energy vehicle market.