(Yicai) July 22 -- Shares of Xpeng Motors rose after the Chinese electric vehicle startup said it has penned a deal with Volkswagen Group to jointly develop an industry-leading electrical/electronic architecture for the German auto giant's China Main Platform and Modular Electric Drive Matrix.

Xpeng [HKG: 9868] closed 3.9 percent higher at HKD33.65 (USD4.31) a share in Hong Kong today. The benchmark Hang Seng Index gained 1.3 percent.

Xpeng and VW will explore further opportunities to work together and use their co-developed E/E architecture on more vehicles, Xpeng announced today. The pair set up co-development project teams in Guangzhou and Hefei, with the first model carrying the system to start mass production within 24 months, it added.

VW China Technology, VW's software unit Cariad China, and Xpeng are jointly developing China Electrical Architecture, a new E/E architecture, VW previously said.

The CEA is a comprehensive technical solution created for the Chinese market and will be used on VW's EVs made in the country based on the CMP and MEB, noted Ralf Brandstätter, chairman and chief executive of VW Group China.

Xpeng leads the CEA project and has sent hundreds of engineers to co-develop the E/E architecture, a source told Yicai.

VW launched E3 centralized E/E architecture on the MEB, but the platform had a lot of bugs in the early stage limited by software capabilities, causing several delays to the mass production of its first product, the ID.3.

Many of VW's EV projects have been postponed again, including the ID.4 upgrade model and Porsche's new electric sport utility vehicle, with the former to be delayed for 15 months and not enter the market until 2029, while the latter will not go into the market until 2031, three years later than scheduled. The delays are caused by difficulties Cariad has faced with the E3 2.0 software platform.

Editor: Martin Kadiev