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Chinese electric vehicle (EV) startup Xpeng Motors and German auto giant Volkswagen have expanded their partnership and will build a super-fast charging network for electric cars in China. The two companies have signed a Memorandum of Understanding (MOU) to jointly build a super-fast charging network in China with mutual access to the networks.
“Through this strategic collaboration, more than 20,000 charging piles operated by both companies, spanning 420 cities in China, will be made available to customers of both XPENG and Volkswagen Group China,” said Xpeng Motors in its release.
Xpeng Motors and Volkswagen to build EV charging network in China
It added, “Combining the technological advantages in high-power liquid-cooled super-fast charging as well as the broad and complementary coverage of both parties in China, customers of both parties will have the opportunity to enjoy the superior fast charging experience across China.”
The companies could explore expanding the partnership and possibly build co-branded super-fast charging stations in China.
Volkswagen Invested in Xpeng Motors
In 2023, Volkswagen partnered with Xpeng Motors to build two EVs on its platform and also bought a stake in the company for a total consideration of $700 million. The deal was a pathbreaker for not only XPEV but also the Chinese EV ecosystem as it reflected the confidence of the German auto giant in a startup EV company. It was also a testimony to Xpeng Motor’s self-driving capabilities. The two companies have expanded their partnership and last year announced a joint sourcing program to cut down on costs.
China is by far the biggest market for new energy vehicles (NEVs), a category that includes hybrids as well as battery electric vehicles (BEVs). China is home to BYD which is the world’s largest seller of NEVs. While EV adoption rates in the US have sagged, they have surged past 50% in China and every second car sold in the country is a NEV now.
EV Charging is Critical to Their Adoption
EV charging network is key to EV adoption. Notably, a well-entrenched EV charging network helps address range anxiety which is among the key reasons many people refrain from buying an electric car. Tesla, which is the largest EV seller in the US has built a wide network of charging stations named Superchargers which are its competitive advantage.
Over the last couple of years, Tesla has partnered with Ford, General Motors, Rivian, and Polestar to share its Superchargers. The deal was a win-win for all the companies. While rival automakers would get access to Tesla’s charging network and would need to spend less on their own charging network, Tesla would realize revenues whenever one of their cars charges at one of its Superchargers.
Xpeng Motors’ Deliveries Rose to Record High in December
Xpeng Motors delivered a record 36,695 vehicles in December and said that deliveries of its low-cost Mona MO3 hit 15,000 in the month. The model’s deliveries have topped 10,000 months for consecutive months.
In 2023, Chinese ride-hailing app Didi took a 3.25% stake in Xpeng Motors in exchange for its electric vehicle and autonomous driving assets. As part of that agreement, Xpeng Motors is producing budget cars under the “MONA” brand. The model’s sales have been quite brisk and helped drive a 34% rise in Xpeng Motors’ 2024 deliveries.
Xpeng Motors is also looking to launch what’s popularly known as extended-range electric vehicle (EREV) in China. These cars come with a fuel tank which can extend the vehicle’s range. These vehicles have been quite popular in China. Li Auto, which gets the bulk of its revenues by selling EREVs hit a new milestone as it delivered over 500,000 vehicles last year and its cumulative deliveries topped 1 million. It became the first emerging Chinese NEV company to hit the milestone.
Western Countries Impose Tariffs on Chinese EVs
Last year US President Joe Biden imposed sweeping tariffs on several Chinese goods, including electric cars, and increased the tariffs to 100%. The move won’t hurt names like Xpeng Motors for now at least as they don’t yet export to the country. The US is hardly the only country trying to clamp down on EV imports from China and Canada too imposed a 100% tariff on EV imports from the country.
However, the bigger trouble for Chinese EV companies is the tariffs in the EU as the region was emerging as a key export destination for them.
Musk Has Praised Chinese EV Companies
While Chinese EV companies are allegedly able to sell cars at low prices due to the alleged subsidies, some others believe that they are simply more efficient than automakers in other countries. On multiple occasions, Tesla’s CEO Elon Musk has praised China’s manufacturing ecosystem and EV companies. Last year during Tesla’s Q4 2023 earnings call, he said, “Frankly, I think if there are not trade barriers established, they will pretty much demolish most other companies in the world.”
Meanwhile, the EU’s tariffs cover BEVs and not hybrids. Unsurprisingly, China’s hybrid exports to the region increased sharply after the tariffs were imposed. China has a massive overcapacity in the automotive industry and its domestic companies have been looking to export markets to sell their excess production.
At the same time, China has been a particularly tough market for foreign automakers and they have been losing market share to domestic Chinese companies. General Motors’ China operations also posted a loss in Q3 2024 but the company is not giving up on that market yet. Last month, it restructured its China operations and incurred over $5 billion in charges.
Xpeng Motors Offers Advanced Self-Driving Functionality
Xpeng Motors offers one of the most advanced self-driving features in China. Tesla incidentally does not offer its full self-driving (FSD) features in China. While Tesla expected regulatory approvals in China by the end of 2024 and was looking to offer FSD in the country from Q1 2025, it hasn’t been able to secure the approvals so far.
Notably, the name FSD is misleading as while the software is quite advanced, it is not L4 fully autonomous as the name might suggest. The nomenclature has been a point of contention with US regulators who accuse the company of deceptive marketing.
