VW stock price is on a losing stream, again. On the other side the Volkswagen Corporation pushes its electric offensive in China with investments worth billions. In addition to the entry into the battery manufacturer Gotion High-Tech -the third-largest Chinese lithium battery maker-already announced on Thursday, the Wolfsburg-based company is also increasing its share in the electrical joint venture JAC Volkswagen, as the group announced on Friday in Beijing. VW takes over JAC’s mother, the state-owned JAG plus half of the shares. The group is investing a total of around 2 billion euros, around one billion of which will go to Gotion High-Tech.
“Together with strong and reliable partners, Volkswagen is further expanding its e-offensive in China,” said CEO Herbert Diess, according to the announcement. “The segment of electric cars is growing rapidly and offers great potential for JAC Volkswagen. Through our strategic participation in Gotion, we are also actively promoting the development of the battery cell in China.” VW China CEO Stephan Wöllenstein spoke of a strategic milestone.
Volkswagen intends to deliver around 1.5 million electric cars in its by far largest single market, China, in 2025. JAC is the smallest joint venture of the Wolfsburgers in the state so far, with the larger partners FAW and SAIC VW has become the market leader in the People’s Republic. JAC was founded in 2017 to build small and medium-sized electric cars. Five additional models are planned by 2025, the construction of a plant for electric models and a research and development center in Hefei.
At Gotion High-Tech, VW becomes the largest single shareholder with a stake of around 26 percent. Volkswagen is therefore the first foreign group to invest directly in a battery manufacturer in China. “For the first time, Volkswagen is taking on a strategic role in a state-owned company in the country and is investing directly in a Chinese battery supplier,” said Wöllenstein. The agreement has no impact on current contracts with other battery suppliers, it said.
The batteries are considered a scarce commodity when starting up electric mobility, which is why car manufacturers are trying to secure their access to sufficient capacity. Volkswagen also wants to manufacture battery cells in Europe, which not every automaker is tackling because of the high investment costs. A production facility is being built in Salzgitter with the Swedish battery specialist Northvolt, which the works council, among others, had insisted on. Experts and companies estimate that the battery in future electric cars will account for a large part of the added value.
The two deals are expected to be completed by the end of the year. After the easing of investment restrictions for foreign auto companies, Volkswagen had already speculated that Volkswagen could get a bigger stake in JAC. The car maker BMW also increases its stake in its Chinese joint venture, BBA, to over half what was previously the upper limit.
China is considered the leading market for electric cars because the Chinese government wants to fight the bad air in the country’s big cities and become the global technology leader on the subject.
Volkswagen was satisfied on Friday with the development of business in China, where the economy is picking up speed again after the corona lockdown ends. After a “black February”, a significant recovery started every month, China boss Stephan Wöllenstein told journalists in Beijing. One could speak of a “little miracle”. With a little optimism, it can be assumed that in May the same number or even slightly more cars were sold than in the same month of the previous year.
Further positive impulses can be expected from economic aid, which was decided at the Beijing People’s Congress, which ended on Thursday. Still, it would be difficult to catch up on any business lost during the Covid crisis by the end of the year. Market shares could be gained compared to the previous year, “but we do not yet see that we will fully make up for what we lost in the first few months.