Selling electric vehicles has become a highly competitive arena, particularly in China, where thin profit margins are a growing concern. Meanwhile, selling advanced software and electronic systems to automakers that are slower to adopt new technologies has proven to be a more lucrative business. Chinese electric vehicle maker Xpeng has discovered this through its partnership with Volkswagen. According to Reuters on September 17, 2026, Xpeng established a dedicated sales team six months ago to market its technological components to other international manufacturers. Volkswagen has served as a successful test case for this strategy. The collaboration began in the summer of 2023 with a $700 million investment from Volkswagen in Xpeng. This led to the joint development of the zonal electronic architecture CEA and the integration of Xpeng's technologies, including the Turing AI chips, into Volkswagen's electric models in China, such as the SUV ID.UNYX 08. This technology has since been expanded to include thermal and hybrid vehicles produced in China. The architecture has become one of Volkswagen's key technological components in the Chinese market, regardless of the vehicle's power source. For Xpeng, the financial benefits have been significant. While vehicle sales are becoming less profitable due to price competition and the costs of transitioning its product line, the gross margin on vehicles dropped to 12.1% in the second quarter of 2026, down from 14.3% the previous year. However, revenue from services and other activities has increased by 93.9% year-on-year, largely due to the technological R&D services provided to Volkswagen. The gross margin from these services reached 75.1%. For Xpeng, the strategy is clear: monetizing its expertise for third-party manufacturers is a way to fund its future development, even though the company remains unprofitable overall. For traditional automakers from Europe, America, or Japan, which are struggling to develop their own software capabilities, Xpeng's offerings represent a shortcut. By using Xpeng's pre-designed solutions, automakers can reduce the number of computers in a vehicle and simplify wiring. They can also integrate Xpeng's infotainment systems and Smart Cockpit, as well as autonomous driving functions and AI chips like the Turing chips and the VLA 2.0 assistance system, without having to invest billions in internal R&D. According to development data shared with Volkswagen, using these pre-designed solutions can reduce vehicle development time by over 30%. The Volkswagen ID.UNYX 08 was developed in just 24 months in China, from the signing of the agreement to the start of production. This speed is crucial in responding to the fast-paced Chinese market. Despite the appeal of such solutions, selling technology under license is not without its challenges. While the idea of accelerating development with Chinese technology excites some manufacturers, licensing agreements in the automotive industry remain complex. The American company Lucid Motors, for example, struggles to turn its advanced electric motor and battery management technology into a commercial success, despite a $450 million supply agreement with Aston Martin. Integrating ultra-specific components into third-party platforms can be as challenging as solving an engineering puzzle. Even Tesla has offered its autonomous driving system, FSD, for licensing, but no competitors seem eager to adopt it. Xpeng's current position as a potential supplier to other manufacturers is promising, but no names have been confirmed yet. For now, there is no clear indication that this licensing strategy will expand beyond Volkswagen, or that it will be applied to vehicles intended for the European market. As with any new business model, the success of Xpeng's licensing approach remains to be seen.