On February 5th, Volkswagen Group (China) announced that the new Volkswagen-branded vehicle developed in collaboration with XPeng will commence production in Hefei in 2026.
It is reported that Volkswagen had previously stated that the collaboration with XPeng in the development of new vehicle models is specifically managed by Volkswagen (China) Technology Co., Ltd. (VCTC) based in Hefei. This time, Volkswagen has confirmed that the production of the related models will be located in Hefei. This further highlights the position of Anhui and Hefei in the Chinese market of Volkswagen Group.
As is well known, China is the largest single market for Volkswagen Group globally. Data shows that China accounts for one-third of Volkswagen Group's sales and is the main contributor to profits. "For Volkswagen Group, the Chinese market is comparable to the European market, and they are reluctant to give it up," said an industry insider.
However, due to the slow pace of electrification transformation, the development of Volkswagen Group in China has been hindered. To make up for the shortcomings, Volkswagen Group has chosen to purchase technology and production platforms from Chinese new energy brands for the Chinese market. Among them, Volkswagen has cooperated with XPeng, including future electric vehicle platforms, software technology, and supply chain aspects.
According to the agreement, the two parties will jointly develop two Volkswagen-branded electric vehicles, which are planned to enter the market in 2026. For this purpose, Volkswagen Group will increase its investment in XPeng by approximately $700 million, acquiring approximately 4.99% of XPeng's shares, and will obtain an observer seat on XPeng's board of directors after the transaction is completed.
