VW and Xpeng eye partnership internationalisation

The two firms are broadening focus away from just China. But achieving alignment in Sino-Western alliances may not be easy

VW and Xpeng eye partnership internationalisation
Xpeng might be keener to take its VW hook-up global than its German partner

Germany’s Volkswagen Group and China’s Xpeng are looking at the potential to expand their partnership announced in late July from a solely China market focus onto a more international footing, following a September trip to VW’s Wolfsburg headquarters from Xpeng CEO He Xiaopeng.

But at least one analyst is unconvinced that the European and Chinese participants have exactly the same vision. And, interestingly, this is a concern he extends to Franco-Italian automaker Stellantis’ link-up with China’s Leapmotor, which had a more explicitly international element when announced late last month.

When VW revealed its collaboration with Xpeng — as well as a broadening of its Audi brand’s collaboration with Chinese OEM Saic — the German firm stressed that the agreements had a China market focus. “Both partnerships provide for the joint development of intelligent, fully connected electric vehicles (ICV) for the Chinese market,” it said.        

“Additional models will supplement the existing product portfolio and tap into further market and customer segments in China’s fast-growing e-mobility market. New strategic cooperations increase local development capacities as part of the Volkswagen Group’s ‘in China for China’ strategy and strengthen alignment with the wishes of Chinese customers,” VW continued.

Even at that stage, analysts questioned whether keeping VW-Xpeng contained to China was a good idea. “When we look at what is still underachieved on the mass market side, it is just far from what you guys are capable of doing, it seems right now.

"So why do you not use this platform or other partnerships where you have guys that can produce more low-cost and take that also into markets like Europe?” asked Tim Rokossa, global co-ordinator automotive sector at Deutsche Bank.

At that point, VW CEO Oliver Blume argued that “the ecosystems are different in between the Western and the Eastern world, so we are building our partnerships in both regions”, although he did admit that within the framework agreement with Xpeng, “there is the opportunity to go out of China”.

And it seems that He’s Wolfsburg visit may have accelerated that potential, at least in the mind of the Chinese executive. "During late September, I had the opportunity to visit the Volkswagen Group's headquarters in Wolfsburg. We had a detailed discussion with Mr Blume and Volkswagen's senior management regarding our comprehensive strategic partnership, which helped clarify the blueprint for our long-term strategic cooperation in technology,” He says.

“We also explored deeper strategic cooperation opportunities in the international market," the Chinese CEO continues.

Clearly, he is enthusiastic about taking the partnership global. VW may be slightly more circumspect.

“The partnership has a clear focus: by bundling core competencies of both sides in development and procurement, we will optimise the cost structures and strengthen the competitiveness of both brands in China, the world’s most dynamic NEV market,” VW’s China arm tells EV inFocus.

“The new Volkswagen brand models will be developed for the Chinese market only," the firm confirms. That seems to dash hopes of more affordable BEVs in mass-market segments produced on Xpeng’s G9 platform coming to Europe bearing a VW badge.

But VW does acknowledge ongoing discussions of a more international approach. “At the same time, the partnership not only has a local impact. The know-how gained in cooperation and the synergies also help both sides in their global development and transformation,” says VW China.

“Therefore, we are always in close dialogue about how we can best exploit the synergies.”

Growing pains

VW and Xpeng’s potentially differing appetites for internationalisation appetite may be part of inevitable growing pains in “groundbreaking” new alliances between Western and Chinese OEMs — where the former are “no longer bring something to the Chinese but learning from the Chinese” — in the view of Phillipe Houchois, managing director at investment bank Jefferies. He sees a similar “slight discrepancy” between how Stellantis and Leapmotor view their partnership outside of China.

His take is that VW will not preclude a “slightly broader” relationship with Xpeng. But any expansion outside of China will likely be dependent on the success of the first, Chinese market phase of the project.

His concern over alignment between Stellantis and Leapmotor is around the former’s declaration that Leapmotor International, a new 51pc:49pc Stellantis-led joint venture (JV) will have “exclusive rights for the export and sale, as well as manufacturing, of Leapmotor products outside Greater China”.

Houchois notes that Leapmotor has been “vaguer” on what rights the new JV will have. So there may be more shuttling between the boardrooms of Europe and China while the finer details of these new cooperations are thrashed out.

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