Volkswagen Is Injecting Billions into the Chinese Electric Car Industry

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Volkswagen AG is investing over $2 billion into Chinese electric car producers.

Volkswagen AG is investing $1.11 billion into a Chinese automaker and an additional $1.22 billion into a local battery producer, according to the Wall Street Journal.

Volkswagen is increasing its stake in an existing joint venture with JAC Motors to 75 percent from 50 percent by acquiring half of JAC’s parent company, Anhui Jianghuai Automobile Group. Additionally, Volkswagen took a 26 percent stake in Guoxuan High-Tech Co., making Volkswagen the biggest shareholder in the company. “This shows once again that Volkswagen is confident in the development of the China market,” said Stephan Wöllenstein, Volkswagen’s China chief executive, on Friday.

China's EV market has hit a bump after experiencing rapid growth for a number of years. Last year, sales decreased 4 percent to 1.2 million vehicles. When the pandemic started, sales decreased 43 percent in the first four months of 2020. However, the German auto giant has faith in the Chinese EV market. Volkswagen plans to offer 80 electric vehicles by 2025 and offer electric versions of all of its vehicles by 2030. The Chinese government also recently increased its own EV sales target.

Volkswagen plans to deliver 1.5 million electric vehicles in China by 2025. "It’s a signal to the industry and especially to Tesla of how determined they are,” said Yale Zhang, managing director of Shanghai-based consulting firm Automotive Foresight. Tesla has been delivering electric vehicles from its Shanghai plant.

Volkswagen's joint venture with JAC began in 2017 with the goal of building entry-level electric vehicles. Since then, the venture has only launched one vehicle but has plans to launch 5 more by 2025. Volkswagen just finished construction on two new EV plants with a combined capacity of 600,000 per year. Volkswagen's investment in Guoxuan will help ensure a steady supply of batteries while the company ramps up production of its electric vehicles.

General Motors Co. and Ford Motor Co. have also shown interest in the Chinese EV market. General Motors plans to release 20 electric vehicles in China by 2023, while Ford plans to launch 15 electric vehicles by 2025.

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