TechTalk Volkswagen iD 3 EV

Published on May 30th, 2020 | by Daniel Sherman Fernandez

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VW China Looking To Lead In Electric Car Sales

Volkswagen has been having high sales in China since it first started selling cars back in 1978. Its first joint venture in China, which was the Shanghai Volkswagen Automotive Co., Ltd., was established in October 1984. Since then Volkswagen has had a strong sales record with all its other brands as well. 

Now, in 2020 Volkswagen AG is in final talks to seal its largest investment deals with Chinese electric vehicle firms, according to Reuters, as the German automaker accelerates its push into the world’s largest market for environmentally friendlier cars. VW’s current global electric vehicle portfolio has two entry-level cars, two luxury cars and a sports car. However, the company’s New Energy Vehicle (NEV) line-up looks much different than its global offerings. 

VW AG is poised to buy 50 per cent of Anhui Jianghuai Automobile Group Holding, the parent of EV partner JAC Motors, for at least 3.5 billion yuan (USD491 million).

It is also set to become the biggest shareholder of EV battery maker Guoxuan High-tech Co Ltd.

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The deals highlight how Volkswagen is keen to retain its status as the largest foreign automaker in China even as government virus-busting measures decimate sales, in the face of encroaching rivals such as Tesla Inc which last year became the first foreign automaker to wholly own a car plant.

At the end of last year when 25 million vehicles were sold in China and just before the coronavirus was first reported in December the government targeted 25 per cent of 2025 annual vehicle sales to be made up of new energy vehicles.

The deals would make Volkswagen the latest foreign automaker to increase ownership in China since the government started to relax ownership rules in 2018, with Germany’s BMW AG quick to take control of its main local venture.

Volkswagen iD 3 EV

Volkswagen target Anhui Jianghuai, based in the eastern city of Hefei, is fully state owned. It counts its core asset as its 25.23 per cent stake in JAC which was formally Anhui Jianghuai Automobile Group Corp Ltd, which has a market value of USD1.84 billion.

The Anhui provincial office of the State-owned Asset Supervision and Administration Commission declined to comment.

After completing the deal, Volkswagen plans to invest fresh capital in its 50:50 venture with JAC and build capacity with its modular MEB platform, an architecture enabling efficient production of various EV models, said one of the people.

JAC shares surged by their maximum 10 per cent on the news on Wednesday, to trade at their highest level since mid-April last year.

Shanghai-listed JAC last week said its parent planned to bring in a strategic investor, which will not cause change in its control.

Volkswagen’s purchase of a stake in Shenzhen-listed Guoxuan, also based in Hefei, would mark it first direct ownership in a Chinese battery maker.

It plans to buy about 27 per cent of Guoxuan mostly via a discounted private share placement as well as from top shareholder Zhuhai Guoxuan Trading Ltd, which holds 18 per cent, and founder Li Zhen, who owns 12 per cent, said one of the people. Son Li Chen also owns 2.5 per cent, showed filings to the stock exchange this month.

Based on Guoxuan’s market capitalization of USD4.3 billion, a 27 per cent stake is worth USD1.16 billion.

Guoxuan has suspended trading of its stock since May 20 and on Tuesday said Zhuhai Guoxuan and Li Zhen would sell part of their holdings to an unidentified strategic investor. It said it will also issue shares to the investor via a private offering.

The deals have yet to be finalized and investment sizes may change as negotiations continue, the people said.

Volkswagen also has ventures with state-owned China FAW Group Corp Ltd and SAIC Motor Corp Ltd. It aims to sell 1.5 million new energy vehicles a year in China by 2025.

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