CEO said he looks forward to working with Volkswagen to bring the best technology and products to the world. Volkswagen China CEO said the two share a common vision for the future of mobility.

(He Xiaopeng (left), chairman and CEO of Xpeng, and Ralf Brandstätter, CEO of Volkswagen China, pictured together. Photo from Mr. He's Weibo.)

Volkswagen and Xpeng (NYSE: XPEV) announced a landmark deal yesterday that will see the German carmaker invest $700 million in the Chinese electric vehicle (EV) maker and co-develop EVs. At the same time, Volkswagen's premium Audi brand has also entered into a partnership with SAIC Group.

Both Xpeng's CEO and the German auto giant's China chief later shared the moment on Chinese social media, providing more details about what's behind the deal.

Xpeng chairman and CEO He Xiaopeng shared a photo of him with Volkswagen China CEO Ralf Brandstätter on Weibo late yesterday, saying the photo had been taken for quite some time but had never been shared publicly.

Mr. He said he appreciates the trust of Brandstätter and the team at Volkswagen, and he looks forward to the two working together to bring the best technology, the best products, and the best brands to the world.

Brandstätter also posted a lengthy Weibo post at almost the same time, sharing what's behind these two deals about the German carmaker in China.

The penetration of new energy vehicles (NEVs) in the Chinese market is already more than 30 percent, and the figure is expected to reach 50 percent by 2025, Brandstätter said, adding that Volkswagen wants to quickly capitalize on the market's huge potential for growth and meet the expectations of Chinese customers for high-quality products.

China Jun NEV retail sales up 14.66% MoM to 665,000 units-CnEVPost

Volkswagen's strategic partnerships with Xpeng and Audi with SAIC are another milestone in the company's "in China for China" strategy, he said.

The Volkswagen brand will develop two new electric models for the mid-size market, while the Audi brand will open up a new premium segment with new electric models, he said.

Crucially, the new models will not replace existing models from either brand, Brandstätter emphasized.

Volkswagen's deep involvement in China's local tech ecosystem will help the company meet the differentiated needs of Chinese customers faster, his Weibo reads.

Volkswagen is not only strengthening its own R&D capabilities through Cariad and Volkswagen (China) Technology Co Ltd (VCTC), but has also established partnerships with local tech firms including Horizon Robotics, Thunder Software Tech and Gotion High-tech, he said.

As a backdrop, last October, Volkswagen announced that its software subsidiary Cariad would set up a joint venture with Chinese self-driving chip maker Horizon Robotics to accelerate efforts to develop smart driving technology locally.

A new partnership with Xpeng and SAIC to jointly develop the next generation of smart, internet-connected cars in China is a natural fit, Brandstätter wrote in the Weibo post yesterday.

Brandstätter said he has had exchanges of high mutual trust with Xpeng's Mr. He and his team over the past few months.

"We are both convinced that the Volkswagen Group and Xpeng share the same values and vision for the future of mobility," Brandstätter's Weibo post reads in Chinese.

"Chairman He Xiaopeng told me that he is very much looking forward to working with the Volkswagen Group, and that the group is one of the international automakers with the deepest understanding of the Chinese market and culture. This comment makes me and our team very proud," he added.

Brandstätter ended his Weibo post with the same group photo shared by Mr. He.

BREAKING: VW to invest $700 million in Xpeng and co-develop EVs