Earlier this month, Volkswagen announced it was rethinking its plan to use its SEAT brand to spearhead its electric vehicle efforts in China. It wasn’t exactly clear at that time what the company’s Plan B was. Certainly it was not abandoning its China plans, was it? This week, that question has been answered. The company now says it is prepared to invest $2.2 billion in its existing partnerships with Chinese companies.
Half of that money will be used to take a 50% stake in JAC Motors, which is owned by the Chinese government. It will also raise its stake in its existing EV joint venture with JAC to 75%, a move that will give it full management control of that enterprise, according to Reuters.
Stephan Woellenstein, head of the company’s China operations, told reporters the new investment will be used to revamp an existing JAC plant to manufacture the first Chinese-built EV based on the company’s MEB electric car platform. Production is scheduled to start in 2023, which seems an extraordinarily long time considering how quickly was Tesla able to build a brand new factory in Shanghai and get production started.
Volkswagen says the joint venture will launch five more electric models by 2025. That’s the year the company intends to be selling 1.5 million new energy vehicles a year in China. The NEV category includes battery electric, plug-in hybrid, and hydrogen fuel cell vehicles.
In a separate transaction, the other half of the money will be used to acquire 26.5% of Guoxuan High-tech Co. The company manufactures batteries for electric vehicles and is located in Hefei, the same city where the JAC factory is located. The move will make Volkswagen the largest shareholder in Guoxuan.
Woellenstein acknowledged that sales of all cars, especially EVs, have been way down so far this year because to the disruptions caused by the coronavirus pandemic, but added he expects his company’s total sales for the year to be equal to 2019’s numbers.
Volkswagen CEO Herbert Diess says of the investments in China, “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.”
Ford & Volkswagen Extend Cooperation
In a separate announcement, Volkswagen said this week it is extending its cooperation with Ford in a move expected to create “annual efficiencies” for both companies. Three projects involving electric passenger cars and commercial vans will be the beneficiaries of the increased cooperation.
- Volkswagen’s Modular Electric Toolkit will be used by Ford for an electric vehicle in Europe.
- A midsize pickup developed by Ford and adapted by Volkswagen Commercial Vehicles in selected markets.
- Volkswagen Commercial Vehicles will be responsible for the development of a city delivery van, while Ford will oversee planning for a van in the one-ton segment.
Additional projects may follow, the company says, including cooperation on Argo AI, an autonomous driving company Volkswagen invested in last year. “Through the cooperation, both manufacturers plan to realize significant synergy effects from shared development costs as well as production synergies,” the company says. Those buzzwords always accompany announcements about sharing arrangements between companies. You can find similar language in the statements coming from Renault and Nissan this week. Sometimes, they are even true.
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