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The shares of Chinese electric-vehicle manufacturers saw a significant rise on Thursday following Volkswagen’s announcement of a partnership with Chinese competitor Xpeng. The collaboration aims to boost Volkswagen’s sales in China, where it has been struggling.
Xpeng’s shares listed in Hong Kong surged over 33%, while Nio and Li Auto, other domestic peers, saw increases of 12% and 4.2% respectively. Xpeng’s stock has doubled in the past six months, driven by strong sales momentum attributed to the competitive pricing of its new G6 model.
Volkswagen stated on Wednesday that it would invest $700 million in Xpeng, seeking to enhance its presence in China’s highly competitive electric-vehicle market. Through the deal, Volkswagen will acquire a 5% stake in the Guangzhou-based EV maker and gain a seat as an “observer” on its board.
In the initial stage of the partnership, Volkswagen and Xpeng will focus on jointly developing two mid-sized VW-branded electric vehicles. The first of these vehicles is planned to be launched in China in 2026.
Volkswagen, a sprawling German group that includes brands such as Porsche and Audi, entered the Chinese market in the late 1970s, establishing itself as one of the first western companies to do so. Despite being the top-selling foreign automaker in China, Volkswagen is falling behind in the rapidly growing electric segment, with Chinese competitors like Xpeng and Warren Buffett-backed BYD gaining market share at a fast pace.
BYD currently dominates China’s new-energy vehicle market, which includes plug-in hybrids and pure battery EVs, with a market share exceeding 37%.
Including the Xpeng investment, Volkswagen has announced investments worth nearly €5 billion in China this year alone. China is the world’s largest car market, and approximately half of Volkswagen’s profits come from the country, where it operates.
Tu Le from Sino Auto Insights called the VW-Xpeng deal a vote of confidence in the Chinese EV industry. However, he also noted that it signifies Volkswagen’s acknowledgment of its inability to compete in the electric market without Chinese technology.
Volkswagen’s increased investments in China coincide with growing concerns in Berlin about German companies’ heavy reliance on Beijing for profits, amid rising geopolitical tensions.
This month, Germany’s foreign minister, Annalena Baerbock, cautioned companies investing heavily in China that they would need to bear more financial risk themselves.
Volkswagen also announced on Wednesday that Audi plans to expand its existing collaboration with SAIC, Volkswagen Group’s first partner in China.
The collaboration between Audi and SAIC will initially focus on electric cars in a segment where Audi currently lacks a presence in China. Volkswagen did not provide specific details about the timing of these plans.
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