VW Expands Its Hold on the Chinese EV Market
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Volkswagen (VW) recently secured a 75% share in a joint venture with JAC, a Chinese EV automaker. VW emerged as the majority stakeholder and will assume management control even as it expands its hold on the Chinese EV market.
As a result, JAC Volkswagen is now Volkswagen (Anhui) Automotive Company Limited. The company has been renamed since an eMobility hub will be set up in Anhui Province. The plant will be VW's controlling joint venture in Hefei and will produce electric vehicles.
VW assumes control of China's JAC plants
First, understand that VW is the second-biggest automaker. In 2020, the company secured a controlling 75% stake in a venture with China's JAC. That happened when Beijing relaxed previous rules barring foreign entities from owning majority stakes in local vehicle companies.
Eventually, VW took control of one of JAC's plants in the eastern city of Hefei. Additionally, VW intends to relocate a significant number of its Beijing-based employees to Hefei.
Also, in 2020, JAC's chairman Xiang Xingchu said the expectation was that the joint venture with VW would make manufacturing 200,000-250,000 vehicles in 2025 and 350,000-400,000 in 2029 achievable.
VW's venture portfolio does not intend to compete directly with its other joint businesses in China. Instead, the company is focusing to ensure that the venture's portfolio is complementary.
Joint venture causes tension with Chinese partners
VW is focusing on tightening its grip on the majority-owned joint venture in China. Their entry into the market has sparked tensions with the automaker's other Chinese partners who fear being sidelined. VW is in additional talks to buy another plant in line with the brand's expansion in EVs.
FAW and SAIC Motor are VW's other Chinese partners that have been rattled by the brand's plan to acquire another plant in the country. Besides holding 40% of its venture with FAW, VW has a 50-50 venture with SAIC. Both partners want VW to commit more models to their ventures.
The German automaker will enjoy some benefits by boosting its majority-owned business in China. That includes avoiding sharing much of its profit with state-run partners. The company will also have an opportunity to accelerate its EV push without having lengthy negotiations with partners.
How many sales is VW making right now in China?
Despite the pandemic, VW sold almost 3.85 million vehicles in China during 2020. That makes the brand the most successful foreign automaker within that nation.
That figure also places the automaker ahead of Toyota and General Motors (GM), which sold 1.8 million and 2.9 million automobiles respectively the same year. Presently, VW makes half of its profits and almost 40% of sales in China, Reuters reported.
The company's joint ventures with FAW and SAIC are responsible for a significant portion of its returns. Audi became the first locally-produced premium car model in China, thanks to FAW-Volkswagen. That led to competition with Daimler and BMW, and the vehicle also grabbed government orders.
Shanghai-based SAIC-Volkswagen, on the other hand, helped VW penetrate the Chinese market. The production of the Santana sedan in 1985 made this objective achievable.
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