Volkswagen to raise stake in JV with JAC Motors
June 2, 2020 Category Foreign investment, Weekly
Volkswagen is planning to increase its stake in its electric car joint venture with JAC Motors from 50% to 75%, thereby becoming the second foreign carmaker to have a controlling stake in a Chinese car manufacturing JV after BMW. The increase in its equity stake is part of a €1 billion agreement to acquire a 50% stake in Anhui Jianghuai Automobile Group Holdings, the parent company of JAC Motors. The deal with JAC Motors is to be closed by the end of the year. In a separate deal, also signed last week, Volkswagen spent €1.1 billion to acquire a 26% stake in Gotion High-Tech Co, becoming the largest shareholder in China’s No 3 battery maker. The two deals are the largest foreign investment in China’s new energy vehicle (NEV) market.
Volkswagen CEO Herbert Diess commented: “The electric car segment is growing rapidly and offers a great deal of potential for JAC Volkswagen.” JAC Volkswagen, which was established in 2017, is dedicated to producing and selling electric vehicles. Volkswagen said it will introduce five new models by 2025. Volkswagen will also introduce models under its mainstream brands into the joint venture, which will have an annual capacity of 350,000 to 400,000 units by 2029. Volkswagen plans to produce around 30 new energy vehicle models in China by 2025 and sell 1.5 million units a year, with most of them pure electric ones. Besides JAC, it has joint ventures with SAIC Motor Corp and FAW Group, and both have built plants for electric vehicles as well. China is Volkswagen’s largest market, accounting for around 40% of its global sales.
China decided in 2018 to phase out the equity cap in the automotive industry. In the same year, BMW became the first international carmaker to acquire a majority stake in its car-making joint venture. As the world’s largest car market, China is home to more than 260 million vehicles now, including 4 million new energy cars. There is still vast potential for further growth, as the number of vehicles per 1,000 people hovers around 185, while the figure in the U.S. is around 800. China is expected to overtake the U.S. in terms of the total number of vehicles by the end of this year. Yale Zhang, Managing Director of Shanghai-based consulting firm Automotive Foresight, said Volkswagen’s two deals will prove to be a good bet when electric cars are more popular two or three years from now. They will prove useful when Volkswagen has to face competition from Tesla. “They show Volkswagen’s firm commitment to electrification, at least in China. The demand is here, so there comes investment,” said Zhang, as reported by the China Daily.
The Ministry of Industry and Information Technology (MIIT) has also come up with measures to support the NEV industry during the Covid-19 pandemic by extending tax exemption and subsidies until 2022. Electric cars like the Tesla Model 3 are also sold at a lower price in China. The Ministry will allow more OEM companies to enter the market and encourage switching from fossil fuel vehicles to NEVs in public services such as law enforcement, logistics and garbage collection.
- KURT VANDEPUTTE (UMICORE) APPOINTED CHAIRMAN OF THE BOARD OF THE FLANDERS-CHINA CHAMBER OF COMMERCE (FCCC)
- Webinar: “Knowing Your Chinese Partner” – May 26, 2021, 10 am – 12 am
- EMA starts rolling review of CoronaVac, WHO approves Sinopharm vaccine for emergency use
- The Global Times warns not to politicize the Comprehensive Agreement on Investment (CAI)
- Hainan to become biggest duty-free market in the world