On August 15th, XPeng Inc. and Volkswagen Group announced that their jointly developed Central Electronic Architecture (CEA) will expand its application scope. Starting from 2027, the CEA architecture will expand from Volkswagen's locally developed pure electric vehicle models to fuel and hybrid vehicle models produced in China. This represents a significant change, taking the highly watched "big-small" cooperation to a deeper level.

XPeng stated in its press release that the joint development teams have designed and verified that the CEA architecture developed for pure electric vehicle platforms can also be deployed to fuel and plug-in hybrid vehicle platforms through platformized technology solutions. This will significantly expand the quantity and scale of CEA architecture-equipped vehicles in the Chinese market, enabling Volkswagen Group to achieve significant platformized scale effects and product competitiveness.

Ralf Brandstätter, CEO of Volkswagen Passenger Cars Brand China and Executive Vice President of Volkswagen Group (China), stated: "By adopting standardized CEA architecture across our entire vehicle lineup, we will achieve dual value: on one hand, accelerating the implementation of digital services and precisely matching customer needs through over-the-air (OTA) updates; on the other hand, leveraging considerable scale benefits to further optimize cost structures and continuously enhance market competitiveness."

According to his statement, all future Volkswagen brand models will apply the CEA architecture. Regarding more specific arrangements, both XPeng and Volkswagen Group representatives provided limited additional information beyond what was contained in their joint announcement. A Volkswagen Group representative noted that the first pure electric collaboration model between Volkswagen and XPeng will launch in 2026.

On July 22, 2024, XPeng and Volkswagen Group signed a CEA architecture technology strategic cooperation joint development agreement, with both parties developing industry-leading electronic and electrical architecture for Volkswagen's CMP and MEB platforms produced in China. At that time, both parties revealed that in the CEA architecture technology strategic cooperation, XPeng and Volkswagen Group established joint development project teams in Guangzhou and Hefei, with engineers from both sides collaborating to complete CEA architecture development work. Through the joint development project teams' technical cooperation, the first model equipped with the jointly developed CEA architecture is expected to enter mass production within 24 months.

Public information shows that the CEA architecture is jointly developed by Volkswagen (China) Technology Co., Ltd. (VCTC, Volkswagen Group's R&D center in China), CARIAD China (Volkswagen Group's software technology subsidiary), and XPeng. CARIAD China will play a key role in the project, developing and integrating the latest generation of Advanced Driver Assistance Systems (ADAS) and intelligent cockpit software functions for the new architecture.

One year later, XPeng and Volkswagen Group announced the expansion of CEA architecture applications from pure electric vehicles developed by Volkswagen in China to fuel and plug-in hybrid vehicles. This move is quite aggressive, as even for pure electric vehicles, the jointly developed models between Volkswagen and XPeng have not yet been launched, and their real competitiveness remains uncertain.

Industry expert Yuan Shuai believes this decision results from the combined effects of technological iteration needs, market competition pressure, and industrial transformation trends. From a technical perspective, traditional fuel and hybrid vehicles have long relied on distributed architectures for electronic systems, leading to hardware redundancy, scattered computing power, and difficult upgrades. Regional control architecture can significantly simplify system complexity, reduce wiring harness costs, and support rapid iteration of Software Defined Vehicles (SDV) through central computing platforms and regional controllers.

As a traditional fuel vehicle giant, Volkswagen's existing vehicle electronic architecture is still primarily distributed, requiring breakthrough of technical barriers to transition to regional control. XPeng, with its self-developed X-EEA 3.0 architecture, has accumulated regional control experience. The cooperation between both parties can achieve technology transfer and accelerate intelligent upgrades for Volkswagen's fuel/hybrid vehicle models.

From a market competition perspective, Volkswagen faces dual challenges in China: electrification transformation pressure and fuel vehicle market contraction. Currently, Volkswagen's fuel vehicle sales still account for a high proportion in China, but policy orientation and consumer preferences are rapidly shifting toward new energy vehicles, especially in the 100,000-200,000 yuan price segment, where hybrid models have become important choices in lower-tier markets due to their combined advantages of range and cost. However, intelligent configurations in this market segment generally lag behind, with consumer demand for intelligent cockpits and L2-level driver assistance not being fully satisfied.

By introducing CEA architecture, Volkswagen can inject an "intelligent" label into its products without completely abandoning the fuel vehicle market, enhancing hybrid vehicle competitiveness and slowing the decline in fuel vehicle sales.

From XPeng's perspective, as a new force automaker, although its sales have increased in recent two years, it has not escaped the loss predicament. According to XPeng Inc. (09868.HK) first quarter 2025 financial results, quarterly revenue was 15.81 billion yuan with a net loss of 660 million yuan. XPeng needs to expand revenue sources through technology output, reducing dependence on vehicle sales. Cooperation with Volkswagen can leverage Volkswagen's supply chain and production scale to share R&D costs.

Sales data shows that Volkswagen Group delivered over 2.9 million vehicles in the Chinese market in 2024, with new energy vehicles accounting for only about 200,000 units, representing 6.9%. Its main new energy ID. pure electric vehicle sales grew 17% year-over-year. Whether in terms of new energy vehicle sales proportion or pure electric vehicle growth rate, Volkswagen's current performance is far below domestic brands and the overall new energy vehicle market average.

In July this year, when disclosing first-half sales performance, Volkswagen Group did not reveal new energy sales in the Chinese market. China Passenger Car Association data shows that from January to July this year, Volkswagen Group's main new energy vehicle models in China, ID.3 and ID.4 CROZZ, cumulatively sold 45,680 and 23,304 units respectively, declining 39.68% and 37.95% year-over-year.

"Expanding CEA architecture coverage essentially grafts electrification capabilities onto all Volkswagen models in China at once. Volkswagen needs to enable fuel and hybrid vehicles to possess OTA capabilities, software iteration, and cost reduction abilities to compete with Chinese new forces in the shortest time possible, otherwise it will be completely marginalized by local competitors after 2027," noted Lu Kelin, Registered Innovation Management Professional and CEO of Lukedao Technology. XPeng, meanwhile, spreads its early electronic and electrical R&D investment costs across the largest scale, locking in orders and influence within Volkswagen's global supply chain while leveraging Volkswagen's channels to promote its software standards globally.