Volkswagen Officially Collaborates With Xpeng To Develop A More Affordable New Electric Car Architecture

Volkswagen began production of the first golf on March 29, 1974. (Doc. Volkswagen)

JAKARTA - Many do not know that China has for years been Volkswagen's biggest market. But on the one hand, especially Volkswagen's electric vehicles are less competitive with other brands including from China itself in terms of the availability of affordable electric cars.

Volkswagen has just announced a partnership with Chinese company Xpeng to develop a new smart electric car architecture. This technology is claimed to allow Volkswagen to offer affordable electric cars in the Chinese market.

An architecture named China Electrical Architecture (CEA) will be used on local-produced Volkswagen electric cars starting in 2026.

According to Volkswagen, the CEA will cut production costs by up to 40 percent compared to the MEB platform they developed in Germany. This cost reduction could be achieved by reducing the number of control units on cars.

This architecture uses a central computer and zone structure to control all electronic devices, including self-driving-like functions.

Reporting from Reuters, April 17, Tesla was previously known as a leader in the use of this kind of architecture. This architecture can reduce the number of cables and components in cars, making them more efficient and cheap to produce.

"The competition in the electric car market is very tight, and we have to adjust our cost structure in order to compete," Ralf Brandstayter, a member of Volkswagen Group's board of directors (VOWG_p.DE) and Volkswagen's head in China, told reporters on Wednesday.

"This is an important step in developing intelligent electric vehicles specifically connected to China, and to accelerate our 'In China, for China' strategy," added Brandstayter.

This announcement is a continuation of last year's partnership, where Volkswagen bought 4.99 percent of Xpeng's shares worth about $700 million. Both also plan to launch two of Volkswagen's newest electric car models by 2026.

At that time, the two companies said that the two models would use Xpeng's G9 'Edward' platform.

Volkswagen, which is seeking to retake China's lost market share of local competitors, announced in February that the first car they developed with Xpeng would be in the form of an SUV.

This collaboration is believed to result in a better economic scale and efficiency in platform development and software, so as to reduce costs and reduce development time by 30 percent,

Previously, Volkswagen officially lost its best-selling car brand title in China to local electric car manufacturer BYD by the end of 2022. Their market share in China fell to 14 percent last year from 18 percent in 2018, mainly due to a decline in sales of gasoline-engined cars.

The German manufacturer is now aggressively expanding their product line in China to attract customers, particularly in the entry-level and mid-level electric cars segments. The reason is, the price of Volkswagen electric cars is currently still above the average of competitors from China who only focus on electric cars.