Since Volkswagen announced its investment in Xiaopeng Motors in July 2023, the bond between Volkswagen and Xiaopeng has become increasingly close.
On July 22nd, Xiaopeng Motors (09868. HK/XPEV. US) announced on the Hong Kong Stock Exchange that it has signed a strategic cooperation and joint development agreement with Volkswagen Group for electronic and electrical architecture technology. Both parties will fully invest in developing industry-leading electronic and electrical architectures for the CMP (Vehicle Platform) and MEB (Global Electric Vehicle Platform) produced by Volkswagen in China, with the first model expected to be mass-produced within approximately 24 months.
Two days before the official announcement of the upgrade of cooperation, informed sources revealed that hundreds of engineers from Volkswagen have settled in the Guangzhou Xiaopeng Motors headquarters to learn technology from them, and the cooperation between the two parties has been fully upgraded.
According to on-site photos obtained from the media, Xiaopeng Motors has set up independent office areas for Volkswagen employees. On the second floor of Xiaopeng Motors' Guangzhou headquarters, a "VW project" sign with the Volkswagen project logo has been hung, and the back of employees' computers is also labeled with the word "VW", which reads "An employee has been sent from the German headquarters to study for three years". The above-mentioned informed sources stated.
A win-win choice
On February 29th of this year, Xiaopeng Motors signed a joint development agreement with Volkswagen. Both parties will jointly purchase and collaborate on the development of shared components for vehicle models and platforms; On April 17th, the cooperation between the two parties further deepened from the previous joint development of complete vehicles to the CEA level of electronic and electrical architecture.
Why does Volkswagen love Xiaopeng alone, despite three official announcements of cooperation progress within a year?
In the view of He Xiaopeng, Chairman and CEO of Xiaopeng Motors, the common pursuit of technological innovation is a key factor for Xiaopeng Motors and Volkswagen to come together.
Xiaopeng Motors has significant technological advantages in intelligent cockpit and intelligent driving. The electronic and electrical architecture platform jointly developed by both parties is based on the latest generation EEA architecture of Xiaopeng Motors.
This is a core technology of vertical integration of software and hardware. Based on this, intelligent assisted driving software and vehicle networking operating systems can be decoupled from underlying hardware and vehicle platforms, enabling rapid software iteration across platforms.
Compared to the distributed architecture of traditional cars, Xiaopeng Motors' EEA "central supercomputing+regional control" architecture has the highest integration level in the industry, which can significantly reduce hardware costs, improve computing power utilization, and achieve intelligent equality.
Compared with traditional gasoline vehicles, new energy vehicles have not only changed their power structure, but also the reconstruction of underlying logic. The electronic and electrical architecture is the key carrier that carries this reconstruction. It is the foundation of automotive intelligence, digitization, and networking, and also the key to supporting high-level autonomous driving. Simply put, in the era of intelligent vehicles, the electronic and electrical architecture is the 'soul' part in the mouths of car companies, "said Zhang Hong, a member of the expert committee of the China Circulation Association, to the reporter of Huaxia Times.
And the transformation needs of the public are also urgent. In 2019, Volkswagen set a record market share of 19.8% in the Chinese market, but due to the subsequent impact of Chinese car companies, Volkswagen's market share in China continued to decline, and by 2023, its market share had already dropped to 11%.
Especially in the field of new energy vehicles, in 2023, Volkswagen delivered about 190000 new energy vehicles in China, an increase of 23%, far lower than the overall growth rate of 37% in the Chinese new energy vehicle market. And the delivery ratio of 190000 vehicles only accounts for 6% of the cumulative delivery volume of Volkswagen Group's various brands in China throughout the year, which is not optimistic for Volkswagen Group, which attaches great importance to the transformation of new energy.
Therefore, the public urgently needs to find a collaborator who is technically proficient and can provide effective experience in the market.
According to official information, the CEA architecture jointly developed by Xiaopeng Motors, Volkswagen, and Volkswagen's software subsidiary CARIAD China will significantly reduce the complexity of the intelligent electronic control system in the car, reduce the number of controllers by 30%, and support remote OTA upgrades. In the future, functions such as autonomous driving can be continuously updated. The CEA architecture will not only be integrated into the two models jointly developed by Xiaopeng and Volkswagen, but also into the CMP platform designed for the Chinese market by Volkswagen. Four Volkswagen pure electric models will be developed for the compact entry-level market, and the first model will be launched in 2026.
Joint technology research and development will accelerate Volkswagen's electrification strategy in China and achieve comprehensive localization. And Xiaopeng will also benefit greatly from this cooperation. According to the financial report, in the first quarter of 2024, Xiaopeng Motors' service and other revenue was 1 billion yuan, an increase of 93.1% from 520 million yuan in the same period of 2023. In fact, this part of the income comes from the revenue generated by Xiaopeng Motors providing technology research and development services to the public.
Not only that, the CMP platform produced by Volkswagen in China is also a platform jointly developed with SAIC Volkswagen and FAW Volkswagen. In other words, in addition to independently developing models for Volkswagen, Xiaopeng Motors' electronic and electrical architecture will also appear in models from SAIC Volkswagen and FAW Volkswagen. With its electronic and electrical architecture, Xiaopeng Motors can leverage all of Volkswagen's electric vehicle products in China.
The era of reverse output has arrived
Not only Xiaopeng and Volkswagen, but also in the past two years, the drama of "strong alliances" between foreign car companies and local Chinese car companies is continuing, such as Stellantis Group and Leapmotor, Jaguar Land Rover and Chery, Audi and SAIC, Toyota and Xiaoma Zhixing, etc. The industry generally believes that the cooperation model between domestic and foreign car companies in China has created a new model of cooperation between Chinese and foreign car companies - "reverse joint venture".
Foreign car companies frequently cooperate with Chinese car companies, which shows that they see the innovative advantages of Chinese car companies in new energy technology and industrial chain. They should strengthen cooperation with Chinese companies and create new cooperation models. I think this is very correct and worthy of praise, "said Dong Yang, Vice Chairman of the China Electric Vehicle Hundred People's Congress and Chairman of the China Automotive Power Battery Industry Innovation Alliance.
Zhang Hong believes that this cooperation model is not simply "technology acquisition", but "technology empowerment", and is far from a single technical assistance, but covers multiple dimensions such as pure electric, hybrid, and autonomous driving.
In addition to technological empowerment, Chinese car companies also hope to open up channels for going global through cooperation.
The fundamental reason for 'reverse joint venture' is that foreign car companies have long decision-making processes and R&D cycles, making it difficult for them to adapt to the rapidly changing Chinese market and quickly develop new platforms and technologies. Chinese car companies also hope to rely on electrification to break through globalization. Essentially, compared to joint ventures 40 years ago, the new round of joint ventures is a completely market-oriented choice, a free flow combination of market factors. Regardless of the joint venture model, it is a win-win deal, "said Zhang Hong.
For example, Zero Run and Stellantis jointly established Zero Run International. Zero Run Motors' products will quickly expand in overseas markets, especially in the European market, with the help of Stellantis Group.
According to Tang Weishi, Global CEO of Stellantis Group, Zero Run International will first start sales in Europe from September 2024, involving countries such as Belgium, France, Italy, Germany, Greece, the Netherlands, Romania, Spain, and Portugal. We plan to expand our sales network in Europe to 200 by the end of this year.
However, it should be noted that 'reverse joint ventures' have certain benefits for Chinese car companies that truly possess technological research and development capabilities. However, relying on overseas brands to sell in the global market can only serve as a transitional measure. In the long run, what Chinese car companies need to do is to further expand overseas,' root in China, and look to the world '. Wilson Senior Automotive Industry Analyst Zhang Yifu pointed out.
The automotive industry is a long chain industry with a strong driving force, so countries attach great importance to the automotive industry. Although many countries welcome Chinese cars to enter, they do not want the entire industry to be occupied by Chinese companies. Chinese car companies still face many challenges in localizing and landing overseas, "Chen Shihua, Deputy Secretary General of the China Association of Automobile Manufacturers, told reporters from Huaxia Times.
Chen Shihua further emphasized that from the perspective of the entire vehicle, the global market and brand operation capabilities, as well as the global R&D and production system, are the key factors determining the success or failure of car companies going global.