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China Fund News reporter Feng Yao

There has been another major progress in the cooperation between Volkswagen and Xiaopeng.

On July 22, Xpeng Motors announced that it had signed a strategic cooperation and joint development agreement on electronic and electrical architecture technology with Volkswagen. Both parties will devote their full efforts to developing a new electronic and electrical architecture for Volkswagen's two major platforms (CMP and MEB platforms) produced in China.

Xiaopeng also confirmed to reporters that the Volkswagen engineering team recently entered Xiaopeng Motors based on the above cooperation. The first model equipped with a new electronic and electrical architecture is expected to be mass-produced within 24 months.

Volkswagen's first localized electronic and electrical architecture

It is understood that after Xiaopeng Motors and Volkswagen signed a strategic cooperation framework agreement on electronic and electrical architecture technology on April 17 this year, the two companies further signed a strategic cooperation and joint development agreement on electronic and electrical architecture technology.

According to the agreement, both parties will devote all their efforts to developing electronic and electrical architectures for Volkswagen's two platforms produced in China - CMP and MEB platforms.

Volkswagen said that this new electronic and electrical architecture (CEA architecture, China Electrial Architecture) was jointly developed by Volkswagen (China) Technology Co., Ltd. (VCTC), Volkswagen subsidiary CARIAD China and Xiaopeng Motors. CARIAD China will play a key role in the project and integrate the latest generation of advanced autonomous driving assistance solutions and smart cockpit software functions for the new architecture research and development.

It is reported that compared with the current electronic and electrical architecture, the advantages of the CEA architecture are: three highly integrated regional controllers will replace a large number of electronic control units, and the number of single-vehicle control units will be reduced by 30%, which can significantly reduce the cost and complexity of the operating system, while improving computing performance and safety; thanks to the central computing platform and greater computing power, complex functions such as advanced autonomous driving assistance can be integrated into the architecture more quickly and conveniently.

At present, Xpeng Motors and Volkswagen have established a joint development project team in Guangzhou and Hefei. According to Xpeng, through the technical cooperation of the joint development project team, the first model equipped with the electronic and electrical architecture jointly developed by the two parties is expected to be mass-produced in about 24 months.

It is worth noting that the CEA architecture is also Volkswagen’s first localized electronic and electrical architecture, which will meet the specific needs of the Chinese market in terms of technology and economy.

Public information shows that the electronic and electrical architecture plays a decisive role in the digitalization of automobiles. As the central control center for managing all important electronic functions, it is also the digital hub connecting the hardware platform with the lower structure of the car (including all basic components such as the powertrain and chassis).

The news also caused a surge in Xpeng Motors' stock price. During trading on July 22, the company's stock price once rose by more than 5%.

Volkswagen's engineering team moves into Xpeng

There were early signs that the cooperation between Xpeng Motors and Volkswagen would further deepen.

Recently, it was reported that Volkswagen has officially sent an elite team of engineers, numbering hundreds, to Xpeng Motors' headquarters in Guangzhou. Based on the CEA project, the two sides' electronic and electrical architecture cooperation project, this team came to Xpeng's headquarters for "interviews and training."

Xiaopeng Motors also confirmed the authenticity of the news to reporters and said that the Volkswagen engineering team moved in based on the above cooperation.

A person familiar with the matter also revealed to reporters that after Volkswagen personnel move in, Xpeng Motors is expected to further take over the electronic and electrical architecture of almost all of Volkswagen's electric vehicles in China.

For Xpeng Motors, it has already tasted the sweetness of cooperation with Volkswagen. Data shows that in the first quarter of this year, Xpeng Motors' service and other revenue was 1 billion yuan, up 93.1% from 520 million yuan in the same period of 2023, and up 22.1% from 820 million yuan in the fourth quarter of 2023.

It is reported that the growth of this part of revenue is mainly due to the technical research and development service income related to the strategic technical cooperation between Xiaopeng Motors and Volkswagen on platforms and software. "The platform software revenue in the first quarter of 2024 was more than 100 million yuan. At the same time, the electronic and electrical architecture cooperation reached with Volkswagen will be included in the revenue from the second half of this year." In the first quarter earnings conference call this year, Xiaopeng Motors management revealed the current income brought by the strategic cooperation with Volkswagen.

In fact, Volkswagen currently attaches great importance to external cooperation in software and electronic and electrical architecture.

In addition to Xpeng Motors, in late June this year, Volkswagen also announced plans to invest $5 billion in Rivian, a new American car-making force, and establish a joint venture to create the next-generation software-defined vehicle (SDV) platform for the two companies' future electric vehicles. Among them, software and electronic and electrical architecture are the top priorities of the cooperation between the two parties.

It is worth mentioning that Volkswagen has recently encountered difficulties in the areas of software and electronic and electrical architecture.

Previously, Volkswagen launched a centralized electronic and electrical architecture called E3 on the MEB platform, which streamlined hundreds of ECUs on the vehicle to three high-computing units. However, due to the limitations of software capabilities, the MEB platform had a large number of bugs in the early stages, and the mass production and launch of its first product, ID.3, was forced to be postponed several times.

Recently, there are reports that Volkswagen's multiple electric vehicle projects have been postponed again, including the ID.4 replacement model and Porsche's new electric SUV. The former will be delayed by 15 months and will not be available until 2029 at the earliest. The latter will not be available until 2031, a full three years later than originally planned.

The reason why the mass production of the above models was delayed is that the E3 2.0 software platform developed by Volkswagen's subsidiary CARIAD encountered difficulties in production.

Editor: Captain

Audit: Wooden Fish

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