Seat and Cupra will receive a research and development investment of €5 billion (£4.5bn) by 2025, with a focus on preparing both brands for further electrification.
Vehicle development will be a core pillar of the latest in a long line of Volkswagen Group electrification investments announced over the past few years, with Seat's technical centre taking the lead. Factories will be upgraded, too, with the two firms' facility in Martorell, Spain intended to become a future hub for Seat's and Cupra's electric vehicle production.
The announcement follows the reveal of the Cupra el-Born, the first electric hot hatchback to be introduced within the VW Group. It's set to go on sale in 2021, after a decision was taken last year not to introduce a specific Seat version but instead focus on the higher-margin Cupra variant.
Speaking to Autocar after the unveiling, Cupra CEO Wayne Griffiths said the decision to launch the model initially as a performance variant is "a win-win for both brands, our customers and our dealers".
He added: "I don't think we will lose anything by launching it as a Cupra. I think we've been able to differentiate the car more in terms of design - make the car much more provocative, more sporty, more sophisticated inside and outside. It shows us that Cupra can perfectly combine electrification and performance."
Griffiths said the decisions to work on the Cupra model started "very soon after" the original Seat-badged concept was unveiled. It was a process of around 18 months to transform the model from its original Seat form to the Cupra version.
When asked if the decision not to do a Seat version indicated that the investment focus was shifting away from Seat and towards Cupra, Griffith said: "We will be investing €5bn [£4.5bn] in both brands, in electrification and technology. We've just invested €1bn [£0.9bn] in the new Seat Leon. We will be spending money on both brands because one is not there to substitute the other. They have totally different purposes, different positioning, different types of cars, different design. They complement each other excellently.
"We have a limited amount of investment and we have to share that across the brands - and we have a third brand now with Seat MO for micro mobility. These areas of the company are profitable. And we've done a good job with Seat, moving it in the last four to five years from being quite irrelevant in terms of market share to become the fastest growing brand in Europe with a market share of over 3%. "
At last year's Frankfurt motor show, Volkswagen chairman Herbert Diess hinted at a plan being considered to rebrand Seat, which would see the Spanish maker taking the Cupra name instead in order to push it further upmarket. However, such a plan or decision has yet to be officially confirmed.
The Cupra brand itself has had a relatively successful start, helped by it being launched off the back of two popular models: the Cupra Leon and a Cupra version of the Seat Ateca. Both models have sold over 40,000 examples combined since the division was split from Seat two years ago.