Chinese electric-car shares boosted by Volkswagen investment in Xpeng

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Shares in Chinese electric-vehicle makers rose sharply on Thursday after Volkswagen announced a tie-up with Chinese rival Xpeng designed to boost the German car manufacturer’s lagging sales in the country.

Xpeng’s Hong Kong-listed shares climbed more than 33 per cent while those of domestic peers Nio and Li Auto rose 12 per cent and 4.2 per cent respectively. XPeng’s stock has doubled in the past six months, with analysts noting a strong recovery in sales momentum due to aggressive pricing of its new G6 model.

Volkswagen said on Wednesday it would invest $700mn in the group as it attempts to boost its presence in China’s highly competitive electric-vehicle market. The deal will give VW a 5 per cent stake in the Guangzhou-based EV maker as well as a seat as an “observer” on its board.

VW said the “initial stage” of their relationship would focus on jointly developing two VW-branded “midsized” electric vehicles, one of which is planned to hit Chinese roads in 2026.

The sprawling German group, which other than its eponymous VW brand includes companies such as Porsche and Audi, was one of the first western companies to enter the Chinese market in the late 1970s.

It still sells more cars in China than in any other company but is falling behind in the fast-growing electric segment as Chinese rivals such as Xpeng and Warren Buffett-backed BYD quickly gain market share.

BYD dominates China’s new-energy vehicle market, which includes plug-in hybrids and pure battery EVs, with a market share of more than 37 per cent.

Including the Xpeng stake, VW has this year alone announced investments worth nearly €5bn in China, the world’s largest car market and where the Wolfsburg-based company makes roughly half of its profits.

The VW-Xpeng deal was a vote of confidence in the Chinese EV industry, said Tu Le of Sino Auto Insights.

However, he added that it was also an admission by VW of its inability to compete in the electric market without Chinese technology.

VW’s increased investments in China also come as Berlin raises concerns over how reliant many German companies are on Beijing for profits amid rising geopolitical tensions.

Germany’s foreign minister Annalena Baerbock this month warned companies investing heavily in China that they would “have to bear more of the financial risk themselves”.

VW also announced on Wednesday that Audi was planning to expand its existing co-operation with SAIC, VW Group’s first partner in China.

The collaboration between Audi and SAIC would start with electric cars “in a segment where Audi does not yet have a presence in China”, VW said, without elaborating on the timing of plans.

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