Volkswagen injects 2 billion euros into the Chinese bet on electric vehicles

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BEIJING / HONG KONG (Reuters) – Volkswagen AG (VOWG_p.DE) plans to boost its electric offer in China, the world’s largest automotive market, by injecting 2.1 billion euros into two Chinese electric vehicle players.

FILE PHOTO: A new logo for German automaker Volkswagen is unveiled at VW headquarters in Wolfsburg, Germany, September 9, 2019. REUTERS / Fabian Bimmer

The agreements come in the form of global competitors such as General Motors (GM.N), Toyota (7203.T) and Tesla Inc (TSLA.O) seek to increase electricity sales in the Chinese automotive market.

Volkswagen has announced that it will invest € 1 billion to acquire a 50% stake in the parent company of Anhui Jianghuai Automobile Group (JAC Motors) (600418.SS), also taking full management control of its existing joint venture with JAC in the field of electric vehicles by increasing its stake to 50%, against 50%.

Chinese Volkswagen chief Stephan Woellenstein told reporters on Friday that the company plans to reorganize an existing JAC plant and launch its first electric model based on its MEB platform, an architecture that enables the efficient production of various models electric vehicles in 2023.

The joint venture will launch five more electric models by 2025, when the German giant aims to sell 1.5 million new energy vehicles (NEV) – including battery electric cars as well as plug-in hybrid and fuel cell vehicles with hydrogen – one year in China.

In a separate transaction, Volkswagen will pay 1.1 billion euros to acquire 26.5% of Guoxuan High-tech Co Ltd (002074.SZ), manufacturer of batteries for electric vehicles, becoming its main shareholder. Volkswagen said Guoxuan, based in Hefei as JAC, will supply batteries to its EV models in China.

Woellenstein said that Anhui province, where Hefei is located, would be Volkswagen’s electric vehicle manufacturing center in China. The Wolfsburg-based automaker has not changed its EV strategy in China after the global gasoline market collapsed, he said.

He said China’s overall auto sales in the second half of this year will be equal to the same period last year. Volkswagen China’s full-year sales will be lower than last year due to the loss of sales in the first few months.

Reuters reported exclusively on Wednesday that VW was in final talks to invest in the two companies.

China has set a target of 25% of annual vehicle sales in 2025 to be made up of UNVs. Last year, more than 25 million vehicles were sold in China.

The measures taken on Friday also make Volkswagen the last foreign automaker to increase ownership of its operations in China since the government began to relax the rules in 2018, along with its German counterpart BMW AG (BMWG.DE) quickly took control of its main local business.

Tesla became the first foreign automaker to 100% own a car factory in China last year.

Volkswagen also has projects with the state-owned China FAW Group Corp Ltd [SASACJ.UL] and SAIC Motor Corp Ltd (600104.SS).

Friday morning, JAC and Guoxuan stocks climbed their maximum daily limit by 10%. Volkswagen shares fell 3%.

Report by Yilei Sun, Julie Zhu and Brenda Goh; Editing by Kenneth Maxwell and David Evans

Our standards:Principles of the Thomson Reuters Trust.

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