Investment in the electric car market comes from volkswagen

To expand the production of electric cars, Volkswagen will invest more than € 2 billion in its affiliate in the world’s largest car market, China, even if there is a decline due to the coronavirus pandemic.

The German group said on Friday it would increase its share in an existing electric car joint venture when investing in a Chinese battery manufacturer. The agreement marks the first major commitment made by a global automaker to China.

VW will spend € 1 billion to control China’s holding in an electric car joint venture with JAC Motors. As part of VW, JAC’s government parent Anhui Jianghuai will acquire a 50 percent stake in the Automobile Group.
The JAC joint venture, established in 2017, is part of VW’s plan to increase its electric car sales in China to 1.5 times by 2025.
Thomas Berger analyst Thomas Fang in Shanghai said that with the two other Chinese partnerships, the smaller JAC initiative offers an opportunity for greater control of operations, compared to state giants FAW Group and SAIC Motor.

He noted that the agreement wanted VW to focus China’s electric otmobile production on Hefei, the capital of eastern Anhui province. The company can also benefit from the support of the state government.
“We see Anhui as a future hub, if not the hub for e-mobility in China,” said Stephan Wöllenstein, Volkswagen’s general manager in the country.
Also on Friday, VW announced that it will spend 1.1 billion euros to purchase a 26 percent stake in the battery manufacturer Gotion High-Tech listed in Shenzhen, and will become the company’s largest shareholder. With the deal, VW will be the first global automaker to directly purchase a domestic Chinese battery manufacturer and will increase its position in the electric otmobile supply chain.

Although China is the largest electric car market, growth stopped last year when the government cut subsidies for certain vehicles. The end of the economic crashes in the country implemented due to Covid-19 could not stimulate the market. Electric car sales decreased in April compared to the previous quarter.

The government has delayed electric car tax cuts and some subsidies to the industry for another two years as part of efforts to support sales.
Competition intensified even more under the leadership of brands such as California-based Tesla, domestic actors Nio and Xpeng.
Despite the recent weakness, China remains at the heart of VW’s plan to switch its € 33 billion focus from fossil fuels to battery-powered engines, while keeping its profits.