Volkswagen Pours More Than $2 Billion Into China's Electric-Car Industry -- 2nd Update
May 29 2020 - 8:01AM
Dow Jones News
By Trefor Moss and Martin Mou
SHANGHAI-- Volkswagen AG is investing EUR1 billion ($1.11
billion) in a Chinese auto maker and a further EUR1.1 billion in a
local battery producer, in the German car maker's latest bet on the
Chinese electric-vehicle sector.
Volkswagen is increasing its stake in an existing joint venture
with JAC Motors to 75% from 50% through the acquisition of half of
JAC's parent company, state-owned Anhui Jianghuai Automobile Group.
The joint venture focuses on electric vehicles.
Separately, Volkswagen took a 26% stake in Guoxuan High-Tech
Co., also known as Gotion High-Tech, becoming the Shenzhen-listed
EV battery company's biggest shareholder. Both companies are based
in the city of Hefei, 300 miles west of Shanghai.
"This shows once again that Volkswagen is confident in the
development of the China market," said Stephan Wöllenstein,
Volkswagen's China chief executive, at a press conference on
Friday.
China's EV market is experiencing a slump after several years of
rapid growth. Sales declined 4% last year to 1.2 million vehicles,
and then fell 43% on year in the first four months of 2020,
accounting for just 3.5% of vehicles sold.
But Volkswagen and others remain convinced that China, followed
by the rest of the world, will ultimately embrace EVs. VW has said
it will launch 80 EVs globally by 2025, and offer electric versions
of all 300 of its global models by 2030.
Despite waning demand, the Chinese government recently increased
its own EV target: Instead of accounting for 20% of Chinese vehicle
sales in 2025, the prospective share is now 25%, which would equate
to sales of roughly six million to seven million vehicles.
Volkswagen aims to deliver 1.5 million EVs in China in 2025, the
company said Friday--an ambitious goal even for the country's
bestselling auto maker.
"It's a signal to the industry and especially to Tesla of how
determined they are," said Yale Zhang, managing director of
Shanghai-based consulting firm Automotive Foresight. Electric-car
maker Tesla Inc. started delivering vehicles from its new Shanghai
plant in December, and eventually aims to produce 500,000 EVs there
annually.
Volkswagen formed its joint venture with JAC in 2017 to build
entry-level EVs. The venture has so far launched only one vehicle,
but on Friday Volkswagen said it would produce five new models by
2025, as well as build an EV plant and a research-and-development
center in Hefei.
Volkswagen has recently finished constructing two new EV plants
with a combined capacity of 600,000 a year with its two main JV
partners, state-owned auto makers FAW Group Corp. and SAIC Motor
Corp.
In 2018, China liberalized its auto market, allowing foreign car
makers to wholly own their Chinese ventures for the first time.
They were previously limited to owning 50% of a local joint
venture.
However, the German auto makers in particular have shown a
preference for investing in their existing joint ventures or
forming new ones. Mr. Wöllenstein stressed the benefits of having a
Chinese partner with local connections and a deep understanding of
the market. Tesla is the only foreign player that has so far chosen
to operate in China without a local partner.
In 2018, BMW AG said it would take a majority stake in its JV
with Brilliance China Automotive Holdings Ltd., upping its share to
75% at a cost of about $4.2 billion, and announced the formation of
a new JV with Great Wall Motor Co. to build the electric Mini. In
January, Mercedes-Benz maker Daimler AG announced a new joint
venture with Zhejiang Geely Holding Group Co. to build electric
Smart cars.
U.S. and Japanese auto makers are also pivoting to EVs in China.
General Motors Co. has said it will release 20 electric models in
China by 2023, while Ford Motor Co. has pledged to launch 15 EVs in
the country by 2025.
The investment in Guoxuan--China's third-largest EV batter maker
after Contemporary Amperex Technology Ltd. and BYD--should help
guarantee battery supply as Volkswagen ramps up its electric-car
output. In 2018, Volkswagen named CATL as one of three main global
battery suppliers, alongside LG Chem Ltd. and Samsung SDI Co.,
which would together deliver $25 billion worth of batteries to the
auto maker.
Buying into a battery maker like Guoxuan gives greater certainty
than supply agreements, said Mr. Zhang, of Automotive Foresight.
"They want to control the battery supply--that is the key for every
EV maker," he said.
Write to Trefor Moss at Trefor.Moss@wsj.com
(END) Dow Jones Newswires
May 29, 2020 07:46 ET (11:46 GMT)
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