German legacy automaker Volkswagen announced Wednesday its plans to launch a new digital architecture to improve its electric vehicles’ charm among Chinese customers with the help of its local partner XPeng.
The move is a crucial part of Volkswagen’s strategy to revitalize its brand in the Chinese market, where it lost ground due to BYD’s unstoppable dominance.
China Electrical Architecture (“E/E Architecture”)
Volkswagen and XPeng signed a new framework agreement to integrate the latter’s latest-gen E/E Architecture into the German automaker’s China Main Platform (CMP).
With this collaboration, XPeng’s internally developed E/E Architecture can equip VW’s electric vehicles with over-the-air (OTA) software update capability for advanced features like autonomous driving systems.
Volkswagen believes the new platform can lessen the electronic control systems’ complexity and lower costs by eliminating up to 30% of the necessary electronic control units.
“By expanding our partnership with XPENG and consistently integrating with China’s industrial ecosystem, we will align our products even faster to the needs of Chinese customers. Both partners bring their strengths to the table.
This increases efficiency, optimises cost structures and accelerates the speed of development. High cost-effectiveness and a fast pace of development are crucial for our competitiveness in China’s dynamic market environment. Through such efforts, we are taking on a leading role in the age of intelligent connected vehicles.”
Ralf Brandstätter, Member of the Board of Management of Volkswagen AG for China
Availability
Volkswagen emphasized that the first electric vehicle model to utilize XPeng’s cutting-edge E/E Architecture would not arrive until 2026. The German automaker may already be late, given that such capabilities are already popular in most EVs available in the Chinese market.
The first models to benefit from the new digital platform are apparently four China-made entry-level compact cars due in 2026. Apart from these, Volkswagen are currently co-developing two models along with XPeng. Those will also use the new E/E Architecture. These two models, including the initial SUV, are reportedly set to hit the market in 2026 as well.
So What?
Volkswagen is heavily struggling in the world’s largest auto market due to the growing dominance of local electric automakers with their lower-cost offerings, particularly BYD.
In March, VW stated that it is ready to sacrifice market share in the Chinese market in 2024. Nonetheless, it will strive to ensure the business’ long-term growth.
In hindsight, it lost its position as China’s best-selling automotive brand to BYD in 2023. It prompted the company to partner with a local brand, XPeng, to make its electric vehicles more appealing to Chinese buyers.
All that said, the new digital architecture is undoubtedly crucial for Volkswagen to reclaim its once-unparalleled market share in China’s automotive market. However, it would face strong competition there, considering that most China-made EVs already offer such features that VW plans to launch in 2026.
