Volkswagen and Xpeng's jointly developed electric vehicles will use Xpeng's G9 'Edward' platform, in a boost for the Chinese startup that analysts said could lift its sales and profitability.
Xpeng will also receive so-called technology service revenue from Volkswagen from next year onwards, overturning a four-decade-old model of foreign automakers charging their Chinese partners for technology licensing.
"We will use the G9 platform and combine it with Volkswagen technology," VW Group CEO Oliver Blume said on a media call on Thursday following half-year results.
He said the two companies would hash out details of which technologies would feature in the joint models from each automaker in the coming weeks.
"We want to tap into white spots on our product portfolio," Blume said.
The Edward platform is an older generation of Xpeng's platform technology, forming the basis for the startup's G9 and P7 models.
Xpeng's latest models, such as the G6 unveiled at the Shanghai auto show in April, are being built on a newer platform, the Smart Electric Platform Architecture (SEPA) 2.0.
Still, news that VW and Xpeng will use the Edward platform could help boost the sales of models still using it, said an analyst who declined to be named.
Xpeng had sold a total of 13,500 G9s as of the end of June, far below the company's original expectation of monthly sales of 10,000 units.
The partnership could also help lower Xpeng's EV production costs by leveraging VW's scale and bargaining power in supply.
While some analysts viewed the news as a defeat for Volkswagen in its attempt to conquer the Chinese EV market, Deutsche Bank welcomed it as "quick and capital-efficient" way to fill its gap in the middle-class EV segment in China.