Volkswagen wants to significantly reduce the cost of electric cars with the new compact car platform planned together with its Chinese partner Xpeng.

The "China Electrical Architecture" (CEA) designed specifically for China will reduce costs by 40 percent compared to the MEB platform developed in Germany, the car manufacturer explained in Beijing on Wednesday. This is achieved, among other things, by reducing the number of control units through a central computer.

Two models based on CEA are to be launched on the market from 2026, the first being a compact SUV. "Competition is very tough and we have to adjust our cost structure in order to be competitive in this environment," said VW China CEO Ralf Brandstätter. The new vehicle architecture is a decisive step towards developing China-specific vehicles and advancing the "In China, for China" strategy.

VW and Xpeng forged the partnership last year, with the Wolfsburg-based group purchasing just under five percent of the Chinese car manufacturer for 700 million dollars. At that time, models based on a platform from Xpeng were announced for 2026.

Volkswagen lost its position as the best-selling car brand in China to local electric car manufacturer BYD at the end of 2022. VW's market share fell to 14% last year from 18% in 2018 as sales of cars with combustion engines declined. The German carmaker wants to expand its product range in China to attract customers in the entry-level and mid-range e-vehicle segment. However, the range is currently priced higher than that of many Chinese pure electric competitors. The ID.3 has become one of the best-selling e-models in China - thanks to a price reduction of a good 5100 dollars.

(Report by Sarah Wu; written by Ilona Wissenbach, edited by Myria Mildenberger. If you have any queries, please contact the editorial team at frankfurt.newsroom@thomsonreuters.com)