Through Volkswagen's partnership with and Audi's with SAIC, Volkswagen is strengthening its position in the Chinese auto market, the German auto giant said.

(A concept car displayed by IM Motors, SAIC's EV arm, at the April 2023 Shanghai auto show. Image credit: CnEVPost)

Along with announcing its partnership with Xpeng (NYSE: XPEV), German auto giant Volkswagen also announced that its premium car brand Audi has entered into a partnership with SAIC Group.

Audi and its Chinese joint venture partner SAIC have signed a strategic memorandum to further deepen their existing cooperation, Volkswagen said in a statement today.

The two companies will expand their electric vehicle (EV) portfolio for the premium market through co-development, the statement said.

As a first step in the plan, Audi will enter segments not previously covered in China by launching new EV models, according to the statement.

The co-developed EV models will be equipped with state-of-the-art hardware and software to provide Chinese customers with an intuitive, connected digital experience, Volkswagen said, adding that all parties will contribute their core competencies in the development process.

Through the partnership between Volkswagen and Xpeng, and Audi and SAIC, Volkswagen is strengthening its position in the Chinese automotive market and continuing to advance its electrification strategy in China, its statement said.

Volkswagen aims to rapidly expand into new customer groups and market segments to fully participate in China's booming EV market, it said.

On July 12, Reuters cited two people familiar with the matter as saying that Audi was in talks with SAIC to buy the latter's EV platform, in an unprecedented effort by Audi to consolidate its market share.

Audi seeks to take over the EV platform owned by IM Motors, SAIC's EV division, the Reuters report said.

IM Motors was founded on November 26, 2020, by SAIC, Zhangjiang Hi-Tech and Alibaba, with SAIC holding a majority stake. Volkswagen's statement today made no mention of IM Motors.

In Deutsche Bank's view, Audi's purchase of an EV platform in China is welcome.

"We would highly welcome Volkswagen buying a BEV platform in China. To us, it would demonstrate a new mindset of Volkswagen with the willingness to really embrace partnerships," Deutsche Bank analyst Tim Rokossa's team said in a July 13 research note sent to investors.

Buying BEV platform in China could be 'big bang' for VW stock to win over large investors, says Deutsche Bank