Volkswagen stated Wednesday that it has signed a deal to collectively develop two new electrical automobiles for China with Chinese language EV maker Xpeng. As a part of the deal, Volkswagen will make investments about $700 million in Xpeng, taking a 4.99% stake.

Xpeng’s U.S.-traded shares had been up greater than 40% on Wednesday morning following the information.

Beneath the deal, Volkswagen and Xpeng will develop two midsize battery-electric fashions based mostly on the platform that underpins Xpeng’s G9, a midsize electrical crossover SUV.

In a separate assertion confirming the deal, Xpeng stated the 2 new automobiles may also incorporate its superior driver-assist software program.

The brand new EVs, which will likely be branded as VWs and offered solely in China, are anticipated to launch in 2026.

Volkswagen is paying $15 per U.S.-traded share for its Xpeng stake and can obtain a seat on the EV maker’s board of administrators, topic to regulatory approvals.

Volkswagen additionally confirmed that its Audi subsidiary has signed a separate cope with its longtime Chinese language three way partnership accomplice, Shanghai-based SAIC Motor, to collectively develop new Audi-branded EVs for the Chinese language market. The plan is to develop new EVs in segments the place Audi doesn’t presently have entries in China, the corporate stated.

“We’re leveraging the strengths of Volkswagen and our companions to create synergies to convey further merchandise to market sooner,” stated Ralf Brandstätter, Volkswagen’s China chief, in a press release. “In doing so, we give attention to the particular wants of our clients in China. On the similar time, we need to considerably optimize improvement and procurement prices.”