Volkswagen Group said today that it has made a preliminary deal with large Chinese automaker Jianghuai Automobile (JAC) to establish a joint venture for building all-electric and plug-in hybrid cars.

The two automakers are studying the feasibility of a new joint venture with the goal of signing a formal agreement within five months, JAC said in a stock exchange filing. A final agreement will be subject to regulatory approval, the filing said.

VW has played a significant role in the Chinese market for three decades, and has been securing more than a third of its global vehicle sales in China in recent years. VW has worked with Chinese automakers SAIC Motor Corp. and FAW Group Corp. to develop its impressive list of light-duty vehicles sold in the market.

While the Chinese government has limited foreign automaker to forging alliances with no more than two local partners, plug-in electrified vehicles haven’t been included in these restrictions. JAC, China’s ninth-largest automaker by group sales, is also a top seller of PEVs in the China market. The company is also one of the last major Chinese automakers to have gone without a foreign venture partner.

Negotiations had been extended for several months. In March, JAC chairman An Jin said in an interview that the company was in negotiations with VW.

SEE ALSO:  Volkswagen Considers China For First Battery Factory

VW is focusing more on its PEV lineup and global sales as it recovers from its diesel emissions reporting scandal. Sales of PEVs through the government’s “new energy vehicles” policies and incentives have made China even more appealing for global automakers to enter the market. PEV sales more than quadrupled last, and rapid sales growth is continuing into this year.

Last week, a Chinese website reported that VW will partner with JAC to manufacture pickup trucks in China.

In 2012, automotive media reported that JAC was showing off a cloned version of a Ford F-150 pickup. Ford conducted an investigation to decide what actions to take. The Ford-inspired pickup was going to be launched that Beijing Motor Show that year by JAC, but Ford was able to stop that from happening, according to media coverage.

Automotive News