BEIJING: Volkswagen will invest around €2 billion ($2.2 billion) in two Chinese companies in the electric vehicle sector, calling it “the world’s biggest market.”
The German car giant said it will take a 50 percent stake in JAG — the parent company of state-owned JAC Motors — and increase its holding in the JAC Volkswagen joint venture from 50 percent to 75 percent for around €1 billion.
The group said in a statement that “by gaining management control, Volkswagen is paving the way for more electric models and infrastructure.”
It will also buy a 26 percent share of Chinese battery supplier Gotion High-Tech for €1.1 billion.
China, which accounts for 40 percent of Volkswagen’s sales, has become the world’s largest auto market in recent years, with Beijing repeatedly pledging to support the electric vehicle industry.
China’s industry ministry said in December the country should seek to ensure one in four of all vehicles sold in 2025 were either hybrids or fully electric vehicles.
Beijing decided in late March to extend the tax exemption for the purchase of electric vehicles by two years.
Car sales in China began to slide in 2018 and fell further when the coronavirus pandemic paralyzed the economy but have rebounded as the country appears to have brought the virus under control.
The JAG investment is the first time the German carmaker will take “a strategic role in a state-owned company,” Volkswagen China CEO Stephan Woellenstein said in a statement.
The lifting of coronavirus lockdowns in China has given the auto industry a jumpstart, with sales rising for the first time in two years as the health crisis eases and restrictions on travel and businesses are lifted.
Sales rose 4.4 percent year-on-year in April, according to figures from the China Association of Automobile Manufacturers, driven by strong demand for commercial vehicles, which soared more than 30 percent.
However, the global car industry faces an existential crisis from the pandemic, which has caused sales to plunge as governments forced citizens to stay at home to slow the spread of the virus.
The Volkswagen announcement came as the French automaker Renault announced 15,000 job losses worldwide, and a day after Japanese automaker Nissan reported a huge $6.2 billion annual net loss.
Nissan, already battling weak demand as well as the fallout from the arrest of its former boss Carlos Ghosn, said the global outbreak had hit all aspects of its business.
Nissan said it will shut its Barcelona plant and slash production.