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German carmaker Volkswagen AG is spending more than 2 billion euros
($2.25 billion) in two deals in China's new energy vehicle sector,
paving the way for its ambitious e-mobility initiative in its most
important market. It is spending around 1 billion euros to acquire a 50 percent stake
in JAG, the parent company of JAC, and to increase its stake in the
joint venture JAC Volkswagen to 75 percent from 50 percent, according to
a deal in late May. The move will help Volkswagen gain management control of JAC
Volkswagen, paving the way for more electric models and infrastructure. Volkswagen has also inked a deal to acquire a 26 percent stake in
China's No 3 battery manufacturer Gotion High-Tech Co, for around 1
billion euros, becoming its largest shareholder. The investment, which is expected to be finished within this year, is
the largest so far in China's e-mobility sector and is expected to
initiate the next chapter for Volkswagen's business in the world's
largest car market. Herbert Diess, CEO of Volkswagen AG, said he appreciates China's
further opening-up and improved market environment, which were the
prerequisites for the deals. The Chinese government decided in 2018 to phase out the equity cap in the automotive industry. The investment will make the carmaker an even more integrated part of China's economy and society. "We're proud of it. Because these agreements are only possible on the
basis of the mutual respect and trust that has grown over decades
between our Chinese partners and ourselves," Diess said. Volkswagen was one of the first international carmakers to operate in
China and so far the largest and most successful one. In 2019,
Volkswagen delivered more than 4 million vehicles in the country. Its first joint venture, SAIC Volkswagen, was established in 1984. Another partnership, FAW-Volkswagen was set up in 1991. Founded in
2017, JAC Volkswagen develops, produces and sells new energy vehicles. Diess said the electric cars segment is growing rapidly and offers a
great deal of potential for JAC Volkswagen, and the strategic investment
in Gotion is driving forward the development of battery cells in China. "Together with strong and reliable partners, Volkswagen is strengthening its electrification strategy in China," Diess said. Volkswagen Group China has already outlined its route to becoming a
net carbon-neutral company. It expects around 1.5 million new energy
vehicles to be sold to customers across the country in 2025. Stephan Woellenstein, CEO of Volkswagen Group China, called the
investment a strategic milestone, as Volkswagen takes a strategic role
in a State-owned company for the first time, as well as investing direct
in a Chinese battery supplier. "These investments shape the character of Volkswagen in China, making
it a more localized, more sustainability-focused mobility company. By
opening up the market, China is giving Volkswagen new business
opportunities." By strengthening its position and advancing JAC Volkswagen through
increased capital, Volkswagen is taking the next step in its Chinese
electrification strategy. The carmaker said it will expand JAC Volkswagen's portfolio by up to
five additional electric models by 2025. It will also build a full-scale
e-model factory and complete construction on a research and development
center in Hefei, Anhui province. 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. The partnership with Gotion has helped Volkswagen secure future demand for batteries for its Chinese e-models. It will supply batteries to JAC Volkswagen and the other two joint ventures as well. Volkswagen added that the deal with Gotion will not affect ongoing contracts with other battery suppliers including CATL. Woellenstein said the company's target of selling 1.5 million new
energy vehicles in 2025 means that it will need another 100 gigwatthours
from now to then, which is beyond the capacity of any supplier. Volkswagen said Gotion will supply batteries to JAC Volkswagen, and the other two joint ventures as well. Diess said the partnership is an opportunity for Volkswagen to
achieve deeper know-how in the field of batteries. Gotion has a number
of projects over the entire battery value chain from sourcing,
development and production to recycling. Volkswagen said Gotion is in the process of becoming a certified
Volkswagen Group battery supplier in China, including supplying local
MEB vehicles. The MEB is the new modular electric vehicle platform of the Volkswagen Group. Currently in China, both FAW-Volkswagen and SAIC Volkswagen have
built MEB plants, with the first model based on the platform scheduled
to hit the market later this year. Woellestein said the first batch of MEB models will sport CATL batteries.
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