A platform strategy has advantages and disadvantages for car manufacturers. On the one hand, it lowers costs because many models use the same parts. On the other hand, customers quickly realize that the Skoda Kodiaq is pretty much identical to the VW Tiguan or the Audi Q5 from the same group, though it is between 5,000 and 10,000 euros cheaper.
Volkswagen is now developing electric cars with a Chinese partner on a joint platform. This can be very clever, as it gives VW development support in building good and affordable electric cars while further strengthening its position in China. But it can also backfire – if customers simply choose the original from Xpeng instead of the German brand. Julia Fiedler analyzes in which direction things are heading.
The Silk Road Initiative, a multi-billion project involving 150 countries, has significantly improved China’s position in the world. The EU refused to be left behind and launched Global Gateway. We have reported on several occasions that the counter-project to the Silk Road suffers from a lack of funding, projects and visibility.
EU Commission President Ursula von der Leyen now wants to change this and mobilize more money for Global Gateway, reports Arne Schuette. As with the Silk Road, private investors are supposed to play a greater role. However, the EU copy will not even come close to the Chinese original in the foreseeable future.
A makeover for 700 million euros: Volkswagen acquired a five percent stake in the Chinese EV manufacturer Xpeng last year. In late July, Volkswagen announced how far the collaboration will go. From 2026, all VW cars on the Chinese market will use the jointly developed CEA electronics architecture. With the help of the young company, VW wants to inject fresh tech expertise into its own models – so that they can continue to keep up in China.
Time is short. In July, electric cars accounted for more than half of new car sales in China for the first time. However, VW is particularly strong in the combustion engine segment and is losing ground in the overall market. In the first half of the year, the German company was able to increase EV sales by 45 percent compared to the previous year. However, the overall figures show how large the gap to market leader BYD already is: Volkswagen sold around 90,000 electric vehicles compared to BYD’s almost 730,000 electric cars.
At least Volkswagen is not on the bottom rung of the ladder, but in the same league as promising start-ups such as NIO or VW’s new partner Xpeng.
The co-founder, CEO and namesake of Xpeng is He Xiaopeng. The internet entrepreneur achieved great success with his first start-up, UCWeb, which Alibaba later acquired in China’s largest M&A deal to date. He then founded Xpeng in 2014. The model range includes five vehicles, but Xpeng is also developing passenger drones and wants to compete with Tesla with its XNGP driver assistance system. The technology is advanced: Since last summer, the Xpeng G9 SUV has been given a testing license to drive fully autonomously as a robotaxi in Guangzhou.
VW wants to build on this expertise. The CEA electronics architecture is being developed in a tripartite alliance with Cariad. It requires significantly fewer control units, which opens up new possibilities for digitalization, such as a new generation of autonomous driving assistants and “smart cockpit software functions.” These will not only be used by vehicles on the China-specific CMP electric car platform, but also by models on the global MEB platform. Ralf Brandstaetter calls it an “important milestone in the China-for-China strategy.”
The China-for-China strategy could turn out to be a smart move to get around the cumbersome corporate structure. For four years, the software subsidiary Cariad, the declared beacon of hope for VW’s software goals, has failed to do so. Cariad was supposed to become the second-largest German software company after SAP and develop its own semiconductors. Instead, product launches are delayed due to software problems, customers complain about flawed updates and management is repeatedly replaced. A tech company’s agility does not seem possible within the Volkswagen Group structure.
In Wolfsburg, they are also developing for German car buyers. They accept it with equanimity to connect their smartphone to the car when they get in because the integrated navigation system is still inferior to Google Maps. Chinese customers tick differently. They have long been accustomed to a high degree of digitalization in their everyday lives and are very open to technology. Manufacturers face high expectations here. After all, they expect innovative technology and good service, for example in the form of uncomplicated software updates.
Renowned car manager Daniel Kirchert blames a cultural problem for traditional companies’ continued struggles with the “smartphone on wheels” concept. Kirchert knows both the corporate world at BMW and the work at a Chinese EV start-up.
He believes that companies must take a more radical approach to the issue. “The traditional manufacturers have an incredibly strong culture of vehicle engineers. These are people who think about the vehicle from the chassis upwards,” says Kirchert. “In order to really implement the concept of the ‘software defined vehicle’, a cultural change would have to take place from the top down, driven by the CEO.” There is a lack of unconditional consistency here. “What I see is evolution rather than revolution.”
VW wants to bring the necessary agility on board with its new partner Xpeng and improve quickly. A strategy that the company is not only pursuing in China: At the end of June, VW announced a cooperation with Michigan-based EV start-up Rivian, whose electric architecture and software platform it intends to utilize soon.
Joint ventures and partnerships are not uncommon. One example is CAMS – a joint venture between Volkswagen, Star Charge, FAW and JAC, which aims to build 17,000 fast-charging points by 2025. The competition is taking a similar approach. BMW is jointly developing vehicle software with Archer Mind Technology from Nanjing.
However, European car manufacturers acquiring a stake in Chinese EV start-ups in order to utilize their platform or develop joint platforms is a new development, says Beatrix Keim, Director Business Development & China at the Center for Automotive Research. So far, only Stellantis and Leapmotor have attempted this kind of cooperation. In both cases, the partners are Chinese companies with sophisticated technology and an established development culture, but which have run into difficulties due to low sales figures.
Despite a production capacity of 600,000, Xpeng only sold 140,000 vehicles in 2023. This means the company is still far from achieving cost-effective production. Meanwhile, fierce, cutthroat competition is raging in the Chinese EV market.
The expert assumes that the cooperation is also in Beijing’s interests. “Xpeng is a company that is already well established in China and has already made an international name for itself.” It is in the government’s interest that they do not collapse.
Kirchert also sees the cooperation with Volkswagen as an opportunity for Xpeng. “Financing is still critical for all these EV start-ups.” They may have nice cars on the market, but they are a long way from being profitable. That’s why such a company may not be able to survive after almost ten years, says Kirchert. “They have to manage to grow, either on their own or together with someone else, in order to achieve economy of scale.”
Auto analyst Keim sees another potential advantage for Xpeng – in the European market. “The cooperation could also lower the threshold for European customers when they see that Volkswagen is involved.” Many are still holding back at the moment. Conversely, however, VW will then also face more competition in the domestic market.
Even if it is only rumored, the expert does not rule out the possibility that Volkswagen could eventually take over Rivian in the USA or Xpeng.
As a global connectivity program, the European Union’s Global Gateway Initiative aims to position Europe as a player in infrastructure projects competing with China. So far, however, after the initiative was presented in 2021, it has hardly been noticed, which is also due to its vague definition and lack of coherence. At least there is now more public information about the funding, as revealed in a report by the German government’s foreign trade agency, Germany Trade and Invest (GTAI).
A total of 300 billion euros will be spent as part of Global Gateway between 2021 and 2027. However, there is no central EU fund from which companies can expect to receive subsidies. Instead, many of the funds will come from the private sector. The EU will only secure the investments with guarantees.
According to GTAI, the European Fund for Sustainable Development Plus (EFSD+), with a volume of almost 40 billion euros for project hedging and mixed financing, is at the heart of these plans. Like German export credit guarantees, also known as Hermes Cover, banks receive compensation from the EFSD+ if insured risk projects fail. The fund is intended to mobilize public and private investments worth 135 billion euros, which will be implemented by a network of around 20 development banks.
EFSD+ is essentially based on two pillars. Two-thirds of the guarantee volume (26.7 billion euros) is earmarked for the European Investment Bank (EIB). This sum, in turn, is divided into four so-called investment windows. Two of them are to benefit developing countries that are unable to finance their infrastructure projects themselves on the capital market. The loans in question do not go directly to companies, but to the governments of the partner countries or their commercial entities, such as state energy suppliers and telecommunications operators. European companies can only benefit if the local players use the funds for international tenders.
The other two EIB investment windows are more directly relevant to the private sector: The third window covers political risks, and the fourth window offers guarantees for private investments in African, Caribbean, and Asia-Pacific partner countries. European companies must have a local branch to be eligible for guaranteed loans.
Another 13.1 billion euros are intended for other European development banks and financial institutions, including the KfW Development Bank and the German Investment Corporation (DEG). This second pillar of the EFSD+ includes seven investment windows for the following areas:
According to the European Commission’s Directorate-General for International Partnerships (DG INTPA) website, six guarantee programs are currently active. Additional programs are at advanced negotiation stages. Around 50 guarantees are expected to be available by the end of the year: 40 via DG INTPA and 10 more from the Directorate-General for Neighborhood Policy and Enlargement Negotiations (DG NEAR). Once signed, they can be used for up to five years.
The first contact for interested parties should be the EU delegation in the respective partner country. However, companies can also directly approach development banks such as DEG and EIB with their proposals or use the advisory services offered by the Agency for Business and Economic Development (AWE). The banks can then provide tailor-made funding with a guarantee within the framework of EFSD+.
EFSD+ makes it a little clearer how the announced investments for Global Gateway will come about. This can also make it easier for European companies to participate in the program – if they are based locally or participate in local tenders.
However, most benefiting companies are unlikely to be aware that they have become part of Global Gateway. One reason for this is that the guarantees only reach them indirectly. Secondly, the EU has not defined which projects are included in Global Gateway. However, there are also transitions and gray areas in China’s Belt and Road Initiative (BRI), where projects are counted as part of the BRI if there is no other information.
According to the GTAI report, the decisive factor for the future financing of Global Gateway will be the EU’s next Multiannual Financial Framework, which will be prepared in 2025 and will cover seven years starting in 2028. The previous Multiannual Financial Framework (2021-27) was already decided before the launch of Global Gateway and therefore does not include any funding for the program. This leaves the same old criticism: Global Gateway is a noble initiative – but hardly anything has been done so far.
Sinolytics is a research-based business consultancy entirely focused on China. It advises European companies on their strategic orientation and specific business activities in the People’s Republic.
These pandas don’t look all that fluffy yet. After all, the two embryos in the womb of Meng Meng, the female panda at Berlin Zoo, are only a few weeks old. After weeks of anticipation, there was a wave of rejoicing in the Panda Garden at Berlin Zoo on Sunday morning. The ultrasound machine first detected a heartbeat, followed shortly by a second.
This is the second time Meng Meng has been pregnant with two cubs. In 2019, she gave birth to Pit and Paule, who had to leave Berlin Zoo at the age of 4 and were taken to China. Despite being born in Berlin, pandas are only loaned from the People’s Republic.
A platform strategy has advantages and disadvantages for car manufacturers. On the one hand, it lowers costs because many models use the same parts. On the other hand, customers quickly realize that the Skoda Kodiaq is pretty much identical to the VW Tiguan or the Audi Q5 from the same group, though it is between 5,000 and 10,000 euros cheaper.
Volkswagen is now developing electric cars with a Chinese partner on a joint platform. This can be very clever, as it gives VW development support in building good and affordable electric cars while further strengthening its position in China. But it can also backfire – if customers simply choose the original from Xpeng instead of the German brand. Julia Fiedler analyzes in which direction things are heading.
The Silk Road Initiative, a multi-billion project involving 150 countries, has significantly improved China’s position in the world. The EU refused to be left behind and launched Global Gateway. We have reported on several occasions that the counter-project to the Silk Road suffers from a lack of funding, projects and visibility.
EU Commission President Ursula von der Leyen now wants to change this and mobilize more money for Global Gateway, reports Arne Schuette. As with the Silk Road, private investors are supposed to play a greater role. However, the EU copy will not even come close to the Chinese original in the foreseeable future.
A makeover for 700 million euros: Volkswagen acquired a five percent stake in the Chinese EV manufacturer Xpeng last year. In late July, Volkswagen announced how far the collaboration will go. From 2026, all VW cars on the Chinese market will use the jointly developed CEA electronics architecture. With the help of the young company, VW wants to inject fresh tech expertise into its own models – so that they can continue to keep up in China.
Time is short. In July, electric cars accounted for more than half of new car sales in China for the first time. However, VW is particularly strong in the combustion engine segment and is losing ground in the overall market. In the first half of the year, the German company was able to increase EV sales by 45 percent compared to the previous year. However, the overall figures show how large the gap to market leader BYD already is: Volkswagen sold around 90,000 electric vehicles compared to BYD’s almost 730,000 electric cars.
At least Volkswagen is not on the bottom rung of the ladder, but in the same league as promising start-ups such as NIO or VW’s new partner Xpeng.
The co-founder, CEO and namesake of Xpeng is He Xiaopeng. The internet entrepreneur achieved great success with his first start-up, UCWeb, which Alibaba later acquired in China’s largest M&A deal to date. He then founded Xpeng in 2014. The model range includes five vehicles, but Xpeng is also developing passenger drones and wants to compete with Tesla with its XNGP driver assistance system. The technology is advanced: Since last summer, the Xpeng G9 SUV has been given a testing license to drive fully autonomously as a robotaxi in Guangzhou.
VW wants to build on this expertise. The CEA electronics architecture is being developed in a tripartite alliance with Cariad. It requires significantly fewer control units, which opens up new possibilities for digitalization, such as a new generation of autonomous driving assistants and “smart cockpit software functions.” These will not only be used by vehicles on the China-specific CMP electric car platform, but also by models on the global MEB platform. Ralf Brandstaetter calls it an “important milestone in the China-for-China strategy.”
The China-for-China strategy could turn out to be a smart move to get around the cumbersome corporate structure. For four years, the software subsidiary Cariad, the declared beacon of hope for VW’s software goals, has failed to do so. Cariad was supposed to become the second-largest German software company after SAP and develop its own semiconductors. Instead, product launches are delayed due to software problems, customers complain about flawed updates and management is repeatedly replaced. A tech company’s agility does not seem possible within the Volkswagen Group structure.
In Wolfsburg, they are also developing for German car buyers. They accept it with equanimity to connect their smartphone to the car when they get in because the integrated navigation system is still inferior to Google Maps. Chinese customers tick differently. They have long been accustomed to a high degree of digitalization in their everyday lives and are very open to technology. Manufacturers face high expectations here. After all, they expect innovative technology and good service, for example in the form of uncomplicated software updates.
Renowned car manager Daniel Kirchert blames a cultural problem for traditional companies’ continued struggles with the “smartphone on wheels” concept. Kirchert knows both the corporate world at BMW and the work at a Chinese EV start-up.
He believes that companies must take a more radical approach to the issue. “The traditional manufacturers have an incredibly strong culture of vehicle engineers. These are people who think about the vehicle from the chassis upwards,” says Kirchert. “In order to really implement the concept of the ‘software defined vehicle’, a cultural change would have to take place from the top down, driven by the CEO.” There is a lack of unconditional consistency here. “What I see is evolution rather than revolution.”
VW wants to bring the necessary agility on board with its new partner Xpeng and improve quickly. A strategy that the company is not only pursuing in China: At the end of June, VW announced a cooperation with Michigan-based EV start-up Rivian, whose electric architecture and software platform it intends to utilize soon.
Joint ventures and partnerships are not uncommon. One example is CAMS – a joint venture between Volkswagen, Star Charge, FAW and JAC, which aims to build 17,000 fast-charging points by 2025. The competition is taking a similar approach. BMW is jointly developing vehicle software with Archer Mind Technology from Nanjing.
However, European car manufacturers acquiring a stake in Chinese EV start-ups in order to utilize their platform or develop joint platforms is a new development, says Beatrix Keim, Director Business Development & China at the Center for Automotive Research. So far, only Stellantis and Leapmotor have attempted this kind of cooperation. In both cases, the partners are Chinese companies with sophisticated technology and an established development culture, but which have run into difficulties due to low sales figures.
Despite a production capacity of 600,000, Xpeng only sold 140,000 vehicles in 2023. This means the company is still far from achieving cost-effective production. Meanwhile, fierce, cutthroat competition is raging in the Chinese EV market.
The expert assumes that the cooperation is also in Beijing’s interests. “Xpeng is a company that is already well established in China and has already made an international name for itself.” It is in the government’s interest that they do not collapse.
Kirchert also sees the cooperation with Volkswagen as an opportunity for Xpeng. “Financing is still critical for all these EV start-ups.” They may have nice cars on the market, but they are a long way from being profitable. That’s why such a company may not be able to survive after almost ten years, says Kirchert. “They have to manage to grow, either on their own or together with someone else, in order to achieve economy of scale.”
Auto analyst Keim sees another potential advantage for Xpeng – in the European market. “The cooperation could also lower the threshold for European customers when they see that Volkswagen is involved.” Many are still holding back at the moment. Conversely, however, VW will then also face more competition in the domestic market.
Even if it is only rumored, the expert does not rule out the possibility that Volkswagen could eventually take over Rivian in the USA or Xpeng.
As a global connectivity program, the European Union’s Global Gateway Initiative aims to position Europe as a player in infrastructure projects competing with China. So far, however, after the initiative was presented in 2021, it has hardly been noticed, which is also due to its vague definition and lack of coherence. At least there is now more public information about the funding, as revealed in a report by the German government’s foreign trade agency, Germany Trade and Invest (GTAI).
A total of 300 billion euros will be spent as part of Global Gateway between 2021 and 2027. However, there is no central EU fund from which companies can expect to receive subsidies. Instead, many of the funds will come from the private sector. The EU will only secure the investments with guarantees.
According to GTAI, the European Fund for Sustainable Development Plus (EFSD+), with a volume of almost 40 billion euros for project hedging and mixed financing, is at the heart of these plans. Like German export credit guarantees, also known as Hermes Cover, banks receive compensation from the EFSD+ if insured risk projects fail. The fund is intended to mobilize public and private investments worth 135 billion euros, which will be implemented by a network of around 20 development banks.
EFSD+ is essentially based on two pillars. Two-thirds of the guarantee volume (26.7 billion euros) is earmarked for the European Investment Bank (EIB). This sum, in turn, is divided into four so-called investment windows. Two of them are to benefit developing countries that are unable to finance their infrastructure projects themselves on the capital market. The loans in question do not go directly to companies, but to the governments of the partner countries or their commercial entities, such as state energy suppliers and telecommunications operators. European companies can only benefit if the local players use the funds for international tenders.
The other two EIB investment windows are more directly relevant to the private sector: The third window covers political risks, and the fourth window offers guarantees for private investments in African, Caribbean, and Asia-Pacific partner countries. European companies must have a local branch to be eligible for guaranteed loans.
Another 13.1 billion euros are intended for other European development banks and financial institutions, including the KfW Development Bank and the German Investment Corporation (DEG). This second pillar of the EFSD+ includes seven investment windows for the following areas:
According to the European Commission’s Directorate-General for International Partnerships (DG INTPA) website, six guarantee programs are currently active. Additional programs are at advanced negotiation stages. Around 50 guarantees are expected to be available by the end of the year: 40 via DG INTPA and 10 more from the Directorate-General for Neighborhood Policy and Enlargement Negotiations (DG NEAR). Once signed, they can be used for up to five years.
The first contact for interested parties should be the EU delegation in the respective partner country. However, companies can also directly approach development banks such as DEG and EIB with their proposals or use the advisory services offered by the Agency for Business and Economic Development (AWE). The banks can then provide tailor-made funding with a guarantee within the framework of EFSD+.
EFSD+ makes it a little clearer how the announced investments for Global Gateway will come about. This can also make it easier for European companies to participate in the program – if they are based locally or participate in local tenders.
However, most benefiting companies are unlikely to be aware that they have become part of Global Gateway. One reason for this is that the guarantees only reach them indirectly. Secondly, the EU has not defined which projects are included in Global Gateway. However, there are also transitions and gray areas in China’s Belt and Road Initiative (BRI), where projects are counted as part of the BRI if there is no other information.
According to the GTAI report, the decisive factor for the future financing of Global Gateway will be the EU’s next Multiannual Financial Framework, which will be prepared in 2025 and will cover seven years starting in 2028. The previous Multiannual Financial Framework (2021-27) was already decided before the launch of Global Gateway and therefore does not include any funding for the program. This leaves the same old criticism: Global Gateway is a noble initiative – but hardly anything has been done so far.
Sinolytics is a research-based business consultancy entirely focused on China. It advises European companies on their strategic orientation and specific business activities in the People’s Republic.
These pandas don’t look all that fluffy yet. After all, the two embryos in the womb of Meng Meng, the female panda at Berlin Zoo, are only a few weeks old. After weeks of anticipation, there was a wave of rejoicing in the Panda Garden at Berlin Zoo on Sunday morning. The ultrasound machine first detected a heartbeat, followed shortly by a second.
This is the second time Meng Meng has been pregnant with two cubs. In 2019, she gave birth to Pit and Paule, who had to leave Berlin Zoo at the age of 4 and were taken to China. Despite being born in Berlin, pandas are only loaned from the People’s Republic.
