Volkswagen To Gain A Competitive EV Advantage With A New Architecture It Developed With XPeng

On Wednesday, Volkswagen AG VWAGY revealed that together with its Chinese EV partner, XPeng Inc XPEV, they have developed a new architecture for EVs. The EV pioneer Tesla Inc TSLA has been leading the market when it comes to architecture that reduces the wiring and components in an electric vehicle to lower the cost of its manufacturing, but with the help of XPeng, Volkswagen will finally be able to compete with Tesla on the cost efficiency front. 

The new architecture will enable Volkswagen to offer more affordable EVs.

Through a central computer and a zonal structure, the architecture controls all electronics to achieve functionssuch as autonomous driving. By reducing the number of control units, the China Electrical Architecture (CEA) will help Volkswagen achieve a cost reduction target of 40% for its China-developed platform compared to its German-developed MEB platform. Volkswagen plans to use the CEA in locally developed Volkswagen-branded EVs from 2026.

A big step in the Xpeng-Volkswagen partnership.

This is quite a milestone in Volkswagen’s development of intelligent connected vehicles for the Chinese market, as the European automaker accelerates its “In China, for China” strategy. When Volkswagen forged a partnership with XPeng last year by buying 4.99% of XPeng, they planned to jointly launch two Volkswagen-branded EV models by 2026, using XPeng’s G9 Edward platform. By joining forces, XPeng and Volkswagen expected to reduce costs and slash development time by 30%.

Lowering the cost of its EV-making by 40% will also help Volkswagen in its efforts to regain its status in China as back in 2022, it got dethroned as the best-selling brand by local EV maker who is also giving Tesla a headache, BYD Company Limited BYDDY. 

BYD is rapidly expanding its offerings, challenging Tesla and Jeep at the same time.

To compete across market segments, BYD unveiled three new cars for its Fang Cheng Bao brand on Tuesday. BYD launched the Fang Cheng Bao brand last summer to focus on personalized need of consumers, especially for off-road and sports vehicles. With the new vehicles, namely an off-road SUV, an SUV forcity driving and a sports car, it is going both against Tesla on the premium end of the market as well as Jeep in the off-road segment. Therefore, despite Volkswagen’s efforts, and the fact the first of the two cars it will develop with XPeng will be an SUV to join this race, Volkswagen is in for a tough EV race.

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