Volkswagen pumps 2 billion euros into China electric vehicle bet, buys stakes in two firms

BEIJING/HONG KONG (Reuters) – Volkswagen AG (VW) (VOWG_p.DE) said on Friday it has agreed to invest 2.1 billion euros ($2.33 billion) in two separate Chinese electric vehicle players, upping its bet on the world’s biggest auto market as international rivals seek to muscle in.

FILE PHOTO: A new logo of German carmaker Volkswagen is unveiled at the VW headquarters in Wolfsburg, Germany September 9, 2019. REUTERS/Fabian Bimmer

VW said it will invest 1 billion euros to take a 50% stake in the state-owned parent of Anhui Jianghuai Automobile Group (JAC Motors) (600418.SS), also raising its stake in an existing electric vehicle joint venture with JAC to 75% from 50%.

The joint venture will launch five more electric models by 2025 and establish a car manufacturing base, said VW. The German giant aims to sell 1.5 million new energy vehicles (NEV) – including battery electric cars as well as plug-in hybrid and hydrogen fuel-cell vehicles – a year in China by 2025.

In a separate transaction, VW said it will pay 1.1 billion euros to acquire 26.5% of Guoxuan High-tech Co Ltd (002074.SZ), a maker of electric vehicle batteries, becoming its biggest shareholder. VW said Guoxuan, based in Hefei like JAC, will supply batteries to its EV models in China.

Reuters exclusively reported on Wednesday that VW was in final talks to invest in the two companies.

The deals come as global rivals like U.S. electric vehicle maker Tesla Inc (TSLA.O) seek to make inroads in the Chinese car market. Tesla last year became the first foreign automaker to wholly own a car plant in China.

China has set a target of 25% of 2025 annual vehicle sales to be made up of NEVs. More than 25 million vehicles were sold in China last year.

Friday’s moves also make VW the latest foreign automaker to increase ownership of operations in China since the government started to relax rules in 2018, with German peer BMW AG (BMWG.DE) quick to take control of its main local venture.

VW also has ventures with state-owned China FAW Group Corp Ltd and SAIC Motor Corp Ltd (600104.SS).

Shares in both JAC and Guoxuan climbed their maximum daily limit of 10% on Friday morning.

Reporting by Yilei Sun, Julie Zhu and Brenda Goh; Editing by Kenneth Maxwell

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