Volkswagen strengthens electrification strategy in China

Date: 01 Jun 2020

Volkswagen plans to increase its share in its joint venture for e-mobility JAC Volkswagen, and invest in battery manufacturer Gotion. By gaining management control, the company is paving the way for more electric models and additional infrastructure.

Reports state that Volkswagen will invest around 1 billion euros (US$1.1 billion), which includes the acquisition of 50% of JAG, the parent company of its partner JAC, and an increase of its stake in JAC Volkswagen from 50% to 75%. Furthermore, Volkswagen will acquire a 26% stake in Gotion for around 1 billion euros, making it the company's largest shareholder.

Dr. Herbert Diess, CEO of Volkswagen AG, said: "Together with strong and reliable partners, Volkswagen is strengthening its electrification strategy in China. The electric cars segment is growing rapidly and offers a great deal of potential for JAC Volkswagen. We are actively driving forward the development of battery cells in China through our strategic investment in Gotion."

"I am delighted with this strategic milestone in our mutual and trusted relations 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," Dr. Stephan W?llenstein, CEO of Volkswagen Group China, said. "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."

China is the world's biggest market for e-mobility. Volkswagen Group China has already outlined its route to becoming a net carbon-neutral company. In 2025, Volkswagen Group China intends to deliver around 1.5 million new energy vehicles (NEVs) to customers across the country. 

Transforming JAC Volkswagen through capital injection

Volkswagen is taking the next step in its Chinese electrification strategy by strengthening its position and advancing its JAC Volkswagen joint venture through increased capital.

Letters of intent were co-signed by Volkswagen (China) Investment Co. Ltd. and the government of Anhui province, which foresee Volkswagen raising its stake in the JAC Volkswagen joint venture from 50% to 75% via an injection of capital. To make this possible, Volkswagen will also be investing in the Anhui government-owned entity JAG, the parent company of JAC. The parties intend to close the 1 billion euro deal by the end of the year, subject to customary regulatory approvals.

Founded in 2017, the JAC Volkswagen joint venture is an all-electric company which develops, produces and sells NEVs. A portfolio expansion of up to five additional battery electric vehicle models by 2025 is planned, as well as construction of a full-scale e-model factory, and completion of the R&D center in Hefei. 

Securing supply of batteries through increased localization

Volkswagen has found a further partner to secure future demand for batteries for its Chinese e-models. With the signing of binding agreements, Volkswagen (China) Investment Co. Ltd. will become the largest shareholder in Gotion, with 26% of the shares, through a buy-in of around 1.1 billion euros. Volkswagen is the first global automaker to invest directly in a Chinese battery supplier. The deal is expected to be completed by the end of 2020, subject to regulatory approvals.

The partnership is an opportunity for Volkswagen to achieve deeper know-how in the battery industry. Gotion maintains various current and future projects throughout the entire battery value chain from sourcing, development and production to recycling. 

Gotion is in the process of becoming a certified Volkswagen Group battery supplier in China, including providing supplies for local MEB vehicles. The MEB is the Volkswagen Group's new modular electric vehicle platform.

Source: The China Internet Information Center

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