Volkswagen giant will own 75% of the shares of the electric car alliance with JAC Motors
The German company announced on Friday that Volkswagen is planning to increase its stake in the partnership of electric vehicles with JAC Motors from 50 to 75%.
The move will make Volkswagen the second foreign automaker to have a controlling stake in a Chinese joint venture after BMW. Volkswagen’s JAC exchange was part of a € 1 billion ($ 1.1 billion) deal. Signed in Beijing on Friday to buy a 50 per cent stake in Anhui shareholder Jianghuai Automobile Group. The parent of Chinese partner JAC Motors.
“By opening up the market, China is giving Volkswagen new business opportunities,”. It said Stephen Wollenstein, CEO of China Volkswagen Group. Referring to China’s decision in 2018 to gradually lift the stock ceiling in the automotive industry.
Volkswagen said the deal with JAC would close before the end of the year. In a separate deal on the same day, it spent € 1.1 billion to acquire a 26% stake in high-tech company Gotion. Becoming China’s third largest battery maker.
Investments shape Volkswagen’s character in China
“These investments shape Volkswagen’s character in China and focus it on a more stable, local mobility company,” Wollenstein said.
The two deals are the largest foreign investment in China’s new energy vehicle market. The largest in the world since 2015. Last year, sales of such vehicles totaled 1.2 million units.
“The electric vehicle segment is growing rapidly and provides high capacity for Volkswagen JAC,”. Said Herbert Diss, CEO of Volkswagen AG.
Volkswagen JAC, founded in 2017, is dedicated to the production and sale of electric vehicles. Volkswagen said it will introduce five new models by 2025. JAC announced in a regulatory file on Friday that Volkswagen will also introduce models with its core brands in joint ventures that will have an annual capacity of 350,000 to 400,000 units by 2029.
Volkswagen plans to produce about 30 new energy-powered vehicles in China by 2025. Selling 1.5 million units a year, most of which are pure electric models.
In addition to JAC, the company has a joint venture with SAIC Motor Corp. and FAW Group, and both have built factories for electric vehicles.
China is the German automaker’s largest market. With brands such as Volkswagen, Audi and Porsche accounting for about 40% of global sales.
Thomas Fang, partner of Roland Berger Global Consulting in China, said Volkswagen transactions show the importance of the Chinese market.
“The Chinese market is huge, so leading automakers are trying to do more when opportunities arise. Like BMW two years ago and now Volkswagen.”
The future for China and Volkswagen
In 2018, China decided to lift its stock restrictions in the automotive industry. In the same year, BMW became the first international automaker to acquire a majority stake in its joint venture.
As the world’s largest car market, China has more than 260 million vehicles, including 4 million energy-efficient vehicles. There is still ample potential for further growth, as the number of vehicles per 1,000 people is around 185, compared to about 800 in the United States.
Kai Rongwa, a senior official at the National Development and Reform Commission, said in a media briefing in April that China was expected to overtake the United States in terms of total number of vehicles.
Yale Zhang, CEO of Shanghai Automotive Foresight-based consulting firm, said the two Volkswagen deals are a far-sighted move in a game.
Investments will be a good condition when electric cars become more popular two or three years later, he said. He said that when Volkswagen has to compete with Tesla, Chinamade electric cars, which will become more popular as their prices decrease, will be useful.
“They show Volkswagen’s strong commitment to electricity, at least in China. Demand is here, so it is being invested,” Zhang said.
The arrival of international automakers will also help improve the overall level of the new energy-intensive vehicle segment in China. “They are like a reminder to Chinese players that if you do not work hard, there will be no place in the market,” Zhang said.
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