Shares of Chinese electric vehicle (EV) manufacturer Xpeng (NYSE:XPEV) went into overdrive on Wednesday as the company announced a strategic technical collaboration agreement with German automotive stalwart Volkswagen (OTCMKTS:VWAGY). Fundamentally, the deal facilitates the broader integration of e-mobility solutions. In addition, XPEV stock jumped 25% and built on those gains in the late morning session on the potential for developing future EV platforms.
According to the official press release, Volkswagen initiated a share purchase agreement for a strategic minority investment amounting to 4.99% of outstanding Class A ordinary XPEV stock. The purchase price came out to $15 per American depositary share for a total consideration of approximately $700 million. Primarily, the objective of this technical collaboration centers on leveraging the entities’ complementary strengths and forge a long-term “win-win” strategic partnership.
Specifically, the agreement calls for Xpeng and Volkswagen to jointly develop two B-class battery EV (BEV) models for sale in the Chinese market under the Volkswagen brand. Production should start in 2026.
In addition, the release noted that “the parties will explore additional potential strategic cooperation in a number of areas, including collaboration on future EV platforms, software technologies and supply chain.”
XPEV Stock Moves on the Potential Expansion of E-Mobility
For XPEV stock, the above announcement opens new opportunities, particularly because Xpeng has been developing full-stack technologies for its EV platforms in house. Therefore, the partnership with Volkswagen should help accelerate its overall efforts in footprint expansion.
“The Volkswagen Group and XPENG each brings in highly complementary strengths into this long-term strategic partnership. We will share Smart EV technologies and world-class design and engineering capability with each other and learn from each other,” remarked in part Xpeng Chairman and CEO Xiaopeng He.
For Volkswagen, company board member Ralf Brandstätter emphasized the importance of local partnerships in fostering a “China for China” strategy. Per Financial Times, this framework “aims to draw on deeper research and development facilities in the country to make products for a vast, growing domestic market.”
Since the beginning of the year, XPEV stock now stands at approximately an 89% return. And it’s possible that there could be more room to run despite today’s big development.
According to Mordor Intelligence, the Chinese EV market may hit $260.84 billion by the end of this year. By 2028, the sector could hit a valuation of $575.56 billion, representing a compound annual growth rate (CAGR) of 17.15%.
Why It Matters
Although XPEV stock enjoys a strong showing for the midweek session, overall, analysts remain less convinced, pegging shares as a consensus hold. This assessment breaks down as four buys, three holds and four sells. Further, the average price target sits at $11.22, implying roughly 42% downside risk.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
