VW, Xpeng prep launches of EVs with new software platform

BEIJING -- Volkswagen Group has developed a new architecture for intelligent and electric cars with its Chinese partner Xpeng, which the German automaker said will help it offer more affordable EVs in its biggest market.

VW plans to use the China Electrical Architecture (CEA) in locally developed VW-branded EVs from 2026, Xpeng said on Wednesday in a statement.

CEA will help the partners to achieve a cost reduction target of 40 percent for the China-developed platform compared to VW's German-developed MEB architecture by reducing the number of control units, Xpeng said.

The architecture uses a central computer and a zonal structure to control all electronics to achieve functions such as autonomous driving. Tesla has been the market leader in this type of architecture, which reduces wiring and components in a car so that it becomes more efficient and cheaper to manufacture.

CEA will allow advanced features such as autonomous driving to be continuously upgraded over-the-air. However, the first cars to use the new platform will not go on sale until 2026, while such features and connectivity are already common in many Chinese EVs.  

CEA will underpin four entry-level compact cars in 2026. It will also be used in two VW-badged vehicles being developed with Xpeng and targeting the mid-range segment, starting with an SUV in 2026.

Beijing show debuts

VW said the platform will reduce the complexity of electronic control systems, cutting up to 30 percent of electronic control units and helping to lower costs.

"Competition is very fierce, and we have to adapt our cost structure to be competitive in this environment," Volkswagen Group China chief Ralf Brandstaetter told reporters on Wednesday. "It's a decisive step in our development of China-specific, intelligent connected vehicles, and the acceleration of our strong 'In China, for China' strategy."

To demonstrate how crucial the Chinese market is to VW's fortunes, the automaker will exhibit 44 models from across its brands at the Beijing auto show, which starts next week. Almost half will be EVs, and there will be six world premieres, Brandstaetter said.

VW and Xpeng formed a partnership last year, when VW bought 4.99 percent of Xpeng for around $700 million.

VW ceded its title of best-selling car brand in China to local EV maker BYD in late 2022. Its market share in China dropped to 14 percent last year from 18 percent in 2018 amid declining combustion-engine sales.

VW said last month that it's willing to give up market share in China this year and next to improve its business in the long term

The automaker is pushing to expand its product range in China to attract customers in the entry- and mid-level segment of EVs in particular, with its current offerings mostly priced above that of many Chinese electric-only rivals.

The VW ID3 has become one of the best-selling EVs in China after the automaker slashed the price by just over $5,100.

Bloomberg contributed to this report