New Delhi:- The main news from the Chinese auto industry this week was Volkswagen's $700 million investment in the country's electric vehicle startup, Xpeng. The partnership is likely to set a precedent for Western carmakers looking to leverage Chinese companies for electric vehicle expertise, while their Chinese counterparts can benefit. from the global distribution of allies abroad.

The deal involves the production of two new battery-powered models under the Volkswagen brand using some of Xpeng's key technologies. These include XNGP vehicle-to-everything (V2X) solutions and XNGP, its ADAS system comparable to Tesla's FSD system and its battery chassis architecture.

Although Xpeng's sales are much lower than those of Tesla and local electric vehicle giant BYD, it has gained a reputation for its focus on cutting-edge technologies. The Guangzhou-based automaker has sought to differentiate itself in the hot electric car race by investing heavily in its proprietary autonomous vehicle technology, while competitors often choose to partnering with AV startups.

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By buying a 5% stake in Xpeng, Volkswagen not only gains access to its AV expertise, but also battery technology and smart cabins, something software-focused AV companies clearly cannot. provide.

For Xpeng, the benefit of this partnership lies in adoption. Its customer base remains limited, accounting for just 2.1% of China's new energy vehicle market (including hybrids) by 2022, according to the country's passenger vehicle industry association. Meanwhile, Volkswagen's two local joint ventures accounted for 15% of China's retail auto market last year.

This means that the partnership can help expand Xpeng's AV system to more users, collect more data, and ultimately improve its algorithms, creating a data feedback loop. which Tesla will benefit for a long time - if the two new models prove to be effective. Volkswagen hasn't had much luck with plug-ins in China. Last year, its electric vehicles accounted for only about 3% of the country's new energy vehicle market.

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In addition, this deal could strengthen Xpeng's global reach. According to a note from Morgan Stanley analyst Tim Hsiao to investors, such a partnership would "lay the groundwork for Chinese automakers to expand overseas" and, in the case of Xpeng, "could open up more cooperation opportunities in the future with the Volkswagen Group". in China and around the world.

Xpeng and its major rival Nio are actively pursuing overseas expansion, although their global business has yet to grow significantly. If the two models are successfully developed together, it is conceivable that Volkswagen will launch them in other markets. For now, this investment seems to be a win-win situation, and other Chinese EV manufacturers as well as global OEMs could follow suit.  

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Volkswagen has made an investment of $700 Million in a Chinese car manufacturing startup named Xpeng to fulfill the regular needs and also come up with two batteries with some new ideas.