Volkswagen to launch new EV platform in China to slash costs and compete with BYD

To boost sales in the world’s largest EV market and one of Volkswagen’s most important regions, the company is launching a new digital EV platform with China’s XPeng. VW says the EV platform will slash costs as it looks to recapture market share in China.

VW to slash costs in China with new EV platform

After BYD ended its 15-year run as China’s selling car brand last year, Volkswagen is looking to regain relevance.

The company announced that the jointly developed E/E Architecture with XPeng will be used in VW brand EVs starting in 2026.

“The collaboration will allow our Smart EV products to be both technologically competitive and cost competitive,” Mr. Xiaopeng He, CEO of XPeng, said.

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XPeng’s E/E Architecture is the brain of its full-stack software and hardware tech. The platform enables Advanced Driver Assistance System (ADAS) features and continuous upgrades over-the-air (OTA).

Under the new agreement, the partners will develop and integrate XPeng’s latest E/E Architecture into VW’s China Main Platform (CMP).

“With our ‘In China, for China’ strategy, we are strengthening the innovative power of the Volkswagen Group in China,” Ralf Brandstätter, VW’s China boss, explained.

Brandstätter said the two will combine strengths, highlighting that “This increases efficiency, optimizes cost structures and accelerates the speed of development.” VW’s China head added lower costs and rapid development are “crucial for our competitiveness in China’s dynamic market environment.”

VW believes it can recapture market share in China with an advanced, low-cost EV platform rolling out. Last July, the company invested $700 million into XPeng for a nearly 5% stake.

Electrek’s Take

As Chinese automakers like BYD release low-cost EVs, like the new Seagull, starting at $9,700 (69,800 yuan), legacy automakers are scrambling to catch up.

Even Ford’s CEO Jim Farley called BYD’s Seagull “pretty damn good.” BYD sees joint venture brands’ market share falling from 40% to 10% over the next three to five years as lower-cost, more advanced EVs roll out.

Volkswagen’s CFO Arno Antilitz warned the company could lose more market share in China until the new EVs begin rolling out.

Meanwhile, VW Group EV sales in China climbed 91% in the first quarter as the automaker aims to recapture market share.

However, by 2026, the “advanced features” may not seem as special as many Chinese automakers already offer them.

What do you guys think? Can Volkswagen make a comeback in China? Let us know your thoughts in the comments below.