Photography: Volkswagen
At the end of July, Volkswagen officially announced that it wanted to forge new partnerships with the Chinese Xpeng and SAIC. Why is it so important for a foreign manufacturer to partner with locals? The German brand is trying at all costs to stay on top of the electric segment in China.
Volkswagen wants to invest 650 million euros in Xpeng
For the moment, Xpeng and Volkswagen have not yet signed anything, but the German manufacturer has committed to acquiring a 5% stake in the Chinese. An investment of 650 million euros. For Volkswagen, this potential partnership is a way to better establish itself in the largest market in the world, the one that is experiencing the wildest growth in electric vehicles. But that’s not the only goal. By taking 5% of Xpeng, Volkswagen also counts “ take advantage of the technologies developed by the Chinese start-up “. In particular, it is a question of using the platforms manufactured by Xpeng.
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The brands of the Volkswagen group intend to expand their range in China, with new models specifically designed for the Chinese market. The manufacturer Xpeng has made a name for itself in the field of software and new technologies. Smaller than some of its domestic rivals in terms of sales volumes, the company is recognized for its capabilities in connectivity and autonomous driving. Volkswagen is betting a lot on this to increase its market share, which is currently only 2.6% in the electric segment in China. Very far behind BYD and its 37.2%.
Rely on a local business
This merger with Xpeng could well be a game-changer according to the German company. Reuters recently revealed that Chinese buyers do not have the same criteria as Europeans at all. They have high expectations on connectivity and infotainment systems. More generally, Chinese consumers want smart vehicles equipped with the latest technologies. Embedded technology is a segment in which Xpeng has invested heavily. The Xpeng P7, for example, is available with what is similar to the ” industry’s most advanced driver assistance system ».
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The Chinese manufacturer is preparing for the democratization of autonomous driving and is equipping its models with numerous sensors (31 for the P7), including 2 LiDARs), millimeter wave radars and even ultrasonic sensors. The company promises its customers a semi-autonomous driving experience in the city and on the highway. By 2026, Volkswagen plans to market two 100% electric vehicles specially designed for the Chinese market and developed jointly with Xpeng. By being on site, the German brand counts “ cut model development time in half ».
The German brand wants to stay in the electric race
If Xpeng acts as “ little thumb facing the giant Volkswagen, this model of collaboration could well prove to be profitable. The German group is struggling to find a place in electric vehicles, but it is still one of the only foreign manufacturers, with Tesla, to be in the top 15 brands that sell the most electric vehicles in China. Volkswagen seems to have found the right price positioning for its ID.3. Proposed at 16,000 euros, it is a hit on the Chinese market. The SAIC-Volkswagen joint venture saw a 305% increase in sales in the month of July 2023.
The other major manufacturers that have been in the automotive industry for years, Toyota, Ford, General Motors, Honda and Nissan, are lagging behind in electric cars in China. They have not yet chosen to partner with local brands. A few years ago, the Chinese government required foreign automakers to work with local entities to enter the Chinese market. If these regulations are no longer in force today, American, European, Japanese or Korean brands will perhaps have no other choice if they wish to establish themselves permanently in China.
Author’s opinion
Long dominated by Western manufacturers, the automotive industry is changing with the advent of the electric car. China, this country which has never been able to bring out a major manufacturer in the time of thermal models, is in the process of taking its revenge on the electric. For the moment, a hundred or so local manufacturers are vying for the market and are trying to get out of the game. BYD is doing the best. This small revolution is pushing historic brands to rethink their model. To conquer the Chinese market, and this is even truer in the electric segment, it is no longer enough to offer the same models as in Europe. Chinese consumers have very specific expectations and are not ready to set them aside. The Volkswagen group has understood this and its various partnerships with local brands (SAIC, Leapmotor or Xpeng) will allow it to stay in the race.
