BUSINESS

XPeng’s EV Tech to Power Volkswagen’s Gas and Hybrid Lineup in China

Published: Aug. 16, 2025 2:11 a.m. GMT+8

00:00

00:00/00:00

Listen to this article 1x

Volkswagen invested around $700 million in XPeng in July 2023, acquiring a 4.99% stake

Volkswagen AG is deepening its partnership with XPeng Inc. to bring the Chinese electric-car maker’s advanced digital systems to Volkswagen’s gasoline and hybrid models in China, extending a technology alliance that had originally targeted electric vehicles (EVs).

The companies began collaborating in April 2024 to develop a next-generation electronic and electrical architecture for Volkswagen’s EVs in China, with the goal of beginning mass production of the first Volkswagen-brand vehicle built with the CEA platform in 2026.

You've accessed an article available only to subscribers

Subscribe today for just $.99.

VIEW OPTIONS

Unlock exclusive discounts with a Caixin group subscription — ideal for teams and organizations.

Subscribe to both Caixin Global and The Wall Street Journal — for the price of one.

Share this article

Open WeChat and scan the QR code

DIGEST HUB

Digest Hub

Back

Explore the story in 30 seconds

Volkswagen is expanding its partnership with XPeng to integrate XPeng’s advanced digital systems into Volkswagen’s gasoline and hybrid cars in China.
The collaboration, which began for EV development, now covers platform, software, and vehicle architecture, with mass production on the CEA platform aimed for 2026.
XPeng’s Q1 auto services revenue increased 43.6% to 1.44 billion yuan, mainly due to technical services for Volkswagen.

AI generated, for reference only

Who’s Who

Volkswagen AG: Volkswagen AG is deepening its partnership with XPeng Inc. to integrate XPeng's advanced digital systems into Volkswagen's gasoline, hybrid, and electric models in China. Initially focusing on EVs, the collaboration has expanded to cover platform development, software, and vehicle architecture. Volkswagen invested approximately $700 million in XPeng, acquiring a 4.99% stake, aiming to modernize its offerings and stay competitive in the rapidly evolving Chinese market.

XPeng Inc.: XPeng Inc. is a Chinese electric-car maker that has partnered with Volkswagen AG. Initially, their collaboration focused on developing advanced digital systems for Volkswagen's EVs in China. This partnership has since expanded to include Volkswagen's gasoline and hybrid models, integrating XPeng's China Electronic Architecture (CEA) into a broader range of vehicles. This move allows XPeng to monetize its software by licensing it to traditional carmakers, contributing significantly to its auto services revenue and gross margin.

Huawei Technologies Co. Ltd.: Huawei Technologies Co. Ltd. is a Chinese supplier. Audi, Volkswagen's premium brand, partnered with Huawei to integrate assisted driving features into a gasoline sedan built with SAIC Motor. This highlights a trend of global automakers leveraging Chinese tech for advanced features in their vehicles.

SAIC Motor: SAIC Motor is mentioned as a partner with Audi, Volkswagen's premium brand. They collaborated to build a gasoline sedan equipped with assisted driving features from Huawei Technologies Co. Ltd. This highlights the trend of global automakers leveraging Chinese technology to enhance their traditional vehicle offerings.

FAW-Volkswagen: The article mentions that a new gasoline SUV from FAW-Volkswagen is equipped with an autonomous driving system from Zhuoyu Technology, a Chinese supplier. This highlights a trend where global automakers, including FAW-Volkswagen, are integrating advanced Chinese technology into their gasoline models to enhance digital features and stay competitive in the Chinese market.

Zhuoyu Technology: Zhuoyu Technology is a Chinese supplier that provides autonomous driving systems. Its technology is being used in a new gasoline SUV from FAW-Volkswagen, demonstrating the trend of traditional automakers integrating Chinese tech into their gasoline models.

AI generated, for reference only

What Happened When

July 2023：: Volkswagen initially invested around $700 million in XPeng, acquiring a 4.99% stake.

April 2024：: Volkswagen AG and XPeng began collaborating to develop a next-generation electronic and electrical architecture for Volkswagen’s EVs in China.

First quarter of 2025：: XPeng’s auto services revenue surged 43.6% year-on-year to 1.44 billion yuan, credited largely to technical R&D services rendered to Volkswagen.

May 2025：: On XPeng’s first-quarter earnings call, Vice President Zhang Xiaofeng said the project was moving quickly, with some products expected to be production-ready within a year (by May 2026).

August 15, 2025：: XPeng announced the verification that the China Electronic Architecture (CEA) can be integrated into internal combustion engines and hybrid systems.

AI generated, for reference only