The Volkswagen Group, which owns car brands like Volkswagen, Audi and Porsche, wants to stay ahead of the pack in the world’s largest and most competitive electric car market, China.

Last year, the Volkswagen brand lost the top spot in the Chinese sales charts after a 15-year reign after being dethroned by BYD, so the German-based group that owns the maker of the Passat and ID.4 wants to regain some of that lost momentum with help from local player Xpeng.

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VW goes on the offensive in China with help from local players

Volkswagen had a bit of a rough time last year in China when it came to sales. The German car brand lost the top spot in the charts after ruling them for over 15 years, so something had to change.

To try and make things better (and cheaper), VW will launch four cheap EVs in China with help from local player Xpeng.

The partnership between the two companies will result in four affordable Volkswagen-branded battery-powered cars engineered specifically for the Chinese market that will utilize Xpeng’s know-how in electric and electronic architectures. Think advanced driving assistance systems (ADAS) and over-the-air updates.

According to the German group, the new zonal E/E architecture bearing the name China Electrical Architecture (CEA) will be jointly developed by Xpeng, Volkswagen China Technology Company (VCTC) and CARIAD China.

This is different from the running gear architecture that integrates things like the traction battery and motors. In China, the upcoming affordable EVs made in collaboration with Xpeng will be based on the so-called China Main Platform (CMP), which–rather confusingly–is being developed in collaboration with the SAIC Volkswagen and FAW Volkswagen joint ventures.

The biggest benefit of Xpeng’s involvement in VW’s upcoming electric cars will be a significant reduction in costs. The German company said that it’s expecting a 40% drop in costs compared to the current MEB platform thanks to the reduced complexity and lower number of control units that come with the adoption of Xpeng’s E/E tech.

Volkswagen Group's new China Electrical Architecture

Besides the four entry EVs that will debut in 2026, the new China Electrical Architecture will also be embedded in two mid-range Volkswagen EVs that are jointly developed with Xpeng, the first of which will be an SUV. Just like their cheaper siblings, these more upmarket models will also hit the Chinese market in two years.

"Competition is very fierce, and we have to adapt our cost structure to be competitive in this environment," Volkswagen Group board member and China chief Ralf Brandstaetter said for Reuters.

Last year, the Volkswagen Group acquired a 4.99% stake in Xpeng for approximately $700 million in a bid to fast-track the development of the aforementioned pair of mid-size electric models.

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