Volkswagen will invest EUR2 billion (USD2.2 billion) to strengthen its electrification strategy in China, according to CEO Herbert Diess.
JAC Volkswagen is the German automaker’s joint venture for e-mobility in China. Volkswagen will invest around EUR1 billion (USD1.1 billion) to acquire 50% of JAG, the parent company of Volkswagen’s partner JAC, and increase its stake in JAC Volkswagen from 50% to 75%. By gaining management control, Volkswagen is paving the way for more electric models and infrastructure. Furthermore, Volkswagen will acquire a 26% stake in battery manufacturer Gotion High-Tech Co., Ltd. for around EUR1 billion (USD1.1 billion), becoming the company’s largest shareholder.
“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,” Diess said.
“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. 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,” said Stephan Wöllenstein, CEO of Volkswagen Group China.
Volkswagen Group China has already outlined its route to becoming a net carbon-neutral company. In 2025, around 1.5 million NEVs are planned for delivery to customers across the country. China is the world’s biggest market for e-mobility.
By strengthening its position and advancing the JAC Volkswagen joint venture through a capital increase, Volkswagen is taking the next step in its Chinese electrification strategy. Letters of intent were co-signed by Volkswagen (China) Investment Co. Ltd. and the government of Anhui province, which foresee Volkswagen raising its stake from 50% to 75% within the JAC Volkswagen joint venture via a capital increase. 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 deal amounting to EUR1 billion (USD1.1 billion) 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 BEV models by 2025 is planned, as well as building a full-scale e-model factory and finishing the R&D center in Hefei.
Securing future battery supply to meet demand will require 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 EUR1.1 billion (USD1.2 billion). Volkswagen is the first global automaker to invest directly in a Chinese battery supplier. The deal is planned to be completed by the end of 2020, subject to customary regulatory approvals.
The partnership is an opportunity for Volkswagen to achieve deeper know-how in the field of batteries. Gotion maintains various current and future projects over 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 supplies for local MEB vehicles. The MEB is the new modular electric vehicle platform of the Volkswagen Group. The deal will not affect ongoing contracts with other battery suppliers.