Xpeng will deepen its cooperation with German automaker Volkswagen AG, with the two pledging to develop a new electrical and electronic solution for all battery-powered cars made in China under the VW brand.

The Chinese electric vehicle maker said on Monday that it has entered into a technical collaboration agreement with the legacy automaker to develop solutions for locally made vehicles based on VW’s so-called China Main platform and Modular Electric Drive Matrix platform.

The two have also established project houses in Guangzhou and Hefei — where Xpeng and VW’s technology hub in China are based respectively — so that engineers from both automakers can work more closely together. The first car equipped with the jointly developed architecture should start production within about 24 months.

The announcement deepens already strong ties between the pair. In July last year, VW said it would make a $700 million investment in Xpeng in return for a 4.99% stake. VW also has an observer board seat, and the automakers have said they’ll try to develop at least two new VW-badged battery-powered models.

For VW, teaming up with Xpeng gives it access to valuable smart-car software that it’s struggled to develop on its own. For Xpeng, the partnership adds financial heft and the chance to expand on a global scale.

With Monday’s agreement, VW "will be launching a new, very powerful electronic vehicle system on the market from 2026,” Ralf Brandstatter, a member of the board of management for VW in China, said. There should also be increased cost efficiencies, he added.

Xpeng Chairman and CEO He Xiaopeng said the collaboration "marks the third major milestone we achieved within a year in our long-term strategic partnership” with VW.