Volkswagen to deploy new architecture and Xpeng to reduce electric car costs in China

Volkswagen AG said Wednesday it has developed a new smart and electric vehicle architecture with its Chinese partner Xpeng, which the German automaker says will help it offer more affordable EVs in its mass market.

Volkswagen plans to use China Electric Design (CEA) in domestically produced VW-branded electric vehicles from 2026.

The CEA will help it achieve a 40% cost reduction target for its Chinese-developed platform compared to its German-developed MEB platform, by reducing the number of control units, the company added. The architecture uses a main computer and circuit board to control all the electronics to achieve functions such as autonomous driving.

American automaker Tesla has been the market leader in this type of architecture, which reduces the car’s wiring and components to make it more efficient and less expensive to manufacture.

“The competition is very fierce, and we have to adjust our cost structure to be competitive in this environment,” said Ralf Brandstaetter, member of the board of directors of the Volkswagen group and head of China.

This is a decisive step in our intelligently integrated China-specific vehicle development and accelerates our strong “In China” strategy, for China.

The announcement follows a partnership established last year, when Volkswagen bought 4.99% of Xpeng for nearly $700 million, with plans to jointly launch two EV models from the Volkswagen brand by 2026.

At the time, both companies said both models would use Xpeng’s G9 “Edward” platform.

Volkswagen, which is trying to regain market share lost in China to its domestic rivals, announced in February that the first of two vehicles it plans to produce for the Xpeng will be an SUV.

The automaker said its economies of scale and platform and software integration will reduce costs and reduce development time by 30%.

Volkswagen ceded its title as China’s best-selling car brand to electric car maker BYD by the end of 2022. Its market share in China fell to 14% last year, compared to 18% in 2018, against a backdrop of declining sales. of combustion. engine.

The German automaker is working to expand its product portfolio in China to appeal to customers in the entry-level and mid-range EV segments in particular, with its current offering relatively high-priced compared to many electric-only Chinese rivals.

Volkswagen announced plans last week to invest 2.5 billion euros ($2.66 billion) in China to expand its production and innovation center in the city of Hefei, in Anhui province.

The ID.3 has become one of the best-selling electric cars in China after the company slashed its price by more than $5,100.

($1 = 0.9416 euros) (Reporting by Sarah Wu; Editing by Sharon Singleton)