Volkswagen strengthens e-mobility offensive in China

A new chapter begins for Volkswagen in China. Volkswagen plans to increase its stake in JAC Volkswagen, its joint venture for electromobility. Around 1 billion euros will be invested in this. This amount includes the acquisition of 50% of JAG, the parent company of Volkswagen partner JAC, and an increase in the stake in JAC Volkswagen from 50% to 75%, thereby gaining control over the management.

Volkswagen (China) Investment Co., Ltd. signs stake in battery manufacturer Gotion High-Tech Co., Ltd. – (photo by VW)

With the capital increase, Volkswagen is paving the way for the expansion of the electric model range and infrastructure. In addition, Volkswagen is investing around 1 billion euros in a stake in the battery manufacturer Gotion High-Tech Co., Ltd. and becomes the largest shareholder in the company with 26 percent.

Dr. Herbert Diess, CEO of Volkswagen AG, said: “Together with strong and reliable partners, Volkswagen is further expanding its e-offensive in China. The electric car segment is growing rapidly and offers great potential for JAC Volkswagen. With our strategic stake in Gotion, we are also actively promoting the development of the battery cell in China.”

Dr. Stephan Wöllenstein, CEO of Volkswagen Group China, said: “I am pleased about this strategic milestone in our trusting business relationships with China. For the first time, Volkswagen is taking on a strategic role in a state-owned company in the country and is investing directly in a Chinese battery supplier. These investments consolidate Volkswagen’s position in China as a sustainable mobility company with a local character. China is opening up new business opportunities for Volkswagen by opening up the market.”

The Volkswagen Group China has already embarked on the path to becoming a climate-neutral company: In 2025, around 1.5 million electric vehicles are to be delivered to customers across the country. China is already the world’s largest market for e-mobility.

Transformation of JAC Volkswagen through capital increase

By expanding its position at JAC Volkswagen, the company can further develop the joint venture and take the next step in its electrification strategy in China. Volkswagen (China) Investment Co., Ltd.’s Memorandum of Understanding and the government of the Anhui province envisages that Volkswagen will increase its stake in the JAC Volkswagen joint venture through a capital increase from 50 percent to 75 percent. To make this possible, Volkswagen will also invest in JAG, the state parent company of JAC. JAG is owned by the Anhui government. The € 1 billion transaction is expected to be completed by the end of the year, subject to regulatory approvals.

The JAC Volkswagen joint venture, founded in 2017, specializes in developing, producing and selling electric vehicles. Five additional models are planned by 2025, the construction of a plant for e-models and the completion of the research and development center in Hefei.

Securing future battery needs requires increased localization

Volkswagen has found another partner to meet future battery capacity needs for its Chinese electric models. By signing the contract, Volkswagen (China) Investment Co. Ltd. with 26 percent the largest shareholder of Gotion and thus the first international automobile manufacturer to invest directly in a Chinese battery supplier. The buy-in is worth around 1 billion euros. The transaction is expected to close by the end of 2020, subject to regulatory approvals

The partnership enables Volkswagen to expand its know-how in the field of batteries. Gotion covers the entire battery value chain from raw material extraction through development and production as well as recycling through various ongoing and future projects. Gotion is in the certification process to qualify as a battery supplier – also for models based on the modular electric drive system (MEB) – from the Volkswagen Group in China.

The agreement has no impact on current contracts with other battery suppliers.

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