China’s electric vehicle (EV) market has experienced significant growth in recent years, cementing itself as a dominant force in the industry. Global leaders like Tesla have recognized the country’s potential and invested heavily in the Chinese market. With the world’s focus on sustainable transportation, the EV sector in China continues to shape the future of mobility. Volkswagen, Germany’s largest car manufacturer, is the latest legacy automaker to enter the Chinese EV market through a landmark deal with Xpeng, a Chinese EV startup.
On July 26, Xpeng’s shares on the US stock market surged by nearly 27% following the announcement of the partnership with Volkswagen. The deal involved Volkswagen investing approximately $700 million in Xpeng, acquiring a 4.99% stake in the company. This development propelled Xpeng’s market valuation by over $1.5 billion, reaching $16.88 billion.
Xpeng’s stock price has been on a significant upward trajectory, gaining more than 32.6% in the past week and nearly 90% on the monthly chart. This growth can be attributed to the overall expansion of the EV market and Xpeng’s recent return to growth in terms of car deliveries. After experiencing over a year of declines, the company has experienced a resurgence.
The partnership with Volkswagen will result in the joint development of two new electric vehicle models specifically for the Chinese market. These models will be based on Xpeng’s G9 crossover SUV tech platform and will incorporate Xpeng’s advanced driver-assist technology. Expected to launch in 2026, the vehicles will carry the Volkswagen brand and will be exclusively sold in China.
Wang Hanyang, an analyst at 86Research Ltd, views the Volkswagen-Xpeng deal as just the beginning of collaboration between Western automakers and Chinese EV startups. He believes that future partnerships will extend beyond the Chinese market to the global market, allowing for the utilization of China’s advanced EV technology through joint ventures and collaborative research.
Citigroup analysts also see this partnership as an opportunity for Volkswagen to counter a decline in its market share in China. The company’s share of China’s rapidly growing EV market dropped to 2.4% in the first half of 2023 from 3.5% in the same period last year. By joining forces with Xpeng, Volkswagen aims to stay competitive in the largest auto market globally.
In summary, Xpeng’s stock witnessed a remarkable surge following its partnership with Volkswagen, as the German automaker injected $700 million into the Chinese EV startup. This deal not only boosts Xpeng’s market valuation but also signifies the beginning of closer collaboration between Western carmakers and Chinese EV startups. As China’s EV sector continues to shape the future of mobility, partnerships like this one will likely extend to the global market, harnessing the advanced EV technology developed in China.
