A Legacy Carmaker Just Announced a $700 Million EV Expansion

The ongoing journey to electrify the automobile industry was bolstered throughout 2023 as legacy automakers began to position themselves in an effort to reduce the hurdles to electric vehicle adoption. A growing list of car companies have signed on with Tesla to gain access to its expansive network of EV charging stations as these companies strive to meet coming electrification goals. 

Though Volkswagen has yet to join that list, the German automaker has been hard at work in expanding its electrification. Volkswagen in March said that, between 2023 and 2027, it plans to invest close to $200 billion in electrification as its EV delivery numbers rose. 

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Volkswagen announced a further step in its electrification plans July 26, as the company entered into a long-term partnership with Chinese EV maker XPeng. Volkswagen paid around $700 million for a 5% stake in XPeng as part of the partnership. 

The goal of the partnership is twofold. On one tier, the new arrangement will allow Volkswagen and XPeng to together develop two B-class battery electric vehicles to be sold in the Chinese market. These models are expected to start production in 2026.

The other leg of this arrangement involves a strategic "cooperation" which will allow the two companies to collaborate "on future EV platforms, software technologies and supply chain."

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The partnership is a key step to Volkswagen's 'in China for China' strategy that will allow the company to increase its portfolio of electric vehicles in the Chinese market. 

"In an intensely competitive and dynamic market environment we are leveraging the partners’ core competences, thus creating synergies to bring additional products to market faster," a  Volkswagen board member for China, Ralf Brandstätter, said in a statement. "At the same time, we can significantly optimize development and procurement costs.”