VW Gets Greenlight In China For Building EVs With JAC Motors

Volkswagen and Jianghuai Automobile Group (JAC Motors) were granted approval Monday to jointly build plug-in vehicles in China.

The joint venture’s approval is to locally manufacture 100,000 battery electric vehicles and it has a market valuation of 5.1 billion yuan ($740 million), according to a JAC Motors stock exchange filing.

The regulatory filing started in September with the ninth largest Chinese automaker. JAC Motors has established a solid presence in China’s new energy vehicle market through its iEV all-electric models. The automaker has added an extended range option to its iEV lineup.

A VW spokesman said that a few administrative procedures still need to be fulfilled before the JV agreement will be finalized.

The JV deal would facilitate the German automaker’s mission to move forward as the top selling global manufacturer of plug-in electrified vehicles, with the target of selling one million of these units per year by 2025. The company expects much of that sales volume to come from its new family of all-electric I.D. vehicles, which have been launched as concept vehicles in the past year.

China has been a big part of VW’s global sales over the past three decades, with more than a third of its global sales coming from that market in recent years. VW has worked with two other Chinese automakers – SAIC Motor Corp. and FAW Group Corp. – to solidify its presence in the market.

The JAW agreement ties into two strategic objectives set by VW – becoming a global leader in PEV sales and retaining its position as the top selling global automaker. VW surprisingly bumped Toyota out of top spot for global vehicle sales in 2016, with China playing an important part. The German automaker is doing all it can to shed its tarnished image from the diesel cheating scandal. Being aggressive in its I.D. vehicles and plug-in hybrid variations is playing a big part in that revised market identity.

Taking a strong foothold in China’s new energy vehicle plays well into that strategy – along with taking away Tesla’s mantle as the world’s leading global EV brand.

Earlier this month, VW’s brand chief Herbert Diess says he’s confident the company will reach its target of selling one million PEVs per year in 2025 and that the I.D. family of vehicles will position the VW brand to take the mantle away from Tesla. China will play an important part of the competitive strategy, he said.

VW is taking the typical approach of global automakers establishing market presence in China by forging JVs with government-backed Chinese companies. Tesla, which has plans to build a factory in country, said it has no plans of going that route.

Tesla CEO Elon Musk had a recent meeting with Chinese vice premier Wang Yang, which received coverage on a state-owned newspaper’s Twitter page – and a comment that a JV was being formed.

“Tesla is deeply committed to the Chinese market, however these rumors are not true,” Tesla later said.

SEE ALSO:  VW Makes Deal with Chinese Automaker JAC to Jointly Build PEVs

Tesla imported 4,799 of its vehicles into China in the first three months of 2017; that was 350 percent more than during the same quarter in 2016, based on data from JL Warren Capital, a New York-based researcher, according to a Fortune report earlier this month. Tesla was able to earn $1 billion in sales revenue in China last year, despite having to raise its Model S and Model X prices 50 percent more in China than any other market.

The electric carmaker has high hopes that its more affordable Model 3 will do especially well in China.

VW is focusing on price-competitive PEV models for the China market, which would tie into the JAC alliance.

The German automaker previously announced plans to sell 400,000 PEVs in China by 2020 to meet strict Chinese emissions regulations. Electric vehicles made with JAC Motors will be in addition to that figure, Reuters reported.


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