VW finalising deals with Chinese electric vehicle firms

Hong Kong/Frankfurt — Volkswagen (VW) is in final talks to seal its largest investment deals with Chinese electric vehicle (EV) firms, two sources said, as the German carmaker accelerates its push into the world’s largest market for environmentally friendlier cars.

The firm is poised to buy 50% of Anhui Jianghuai Automobile Group, the parent of EV partner JAC Motors, for at least 3.5-billion yuan ($491m), the people said on condition of anonymity as the matter was private.

It is also set to become the biggest shareholder of EV battery maker Guoxuan High-Tech, the people said, adding that both deals could be announced as early as Friday.

VW declined to comment on the deals, details of which are reported here for the first time. JAC and Guoxuan declined to comment.

The deals highlight how VW is keen to retain its status as the largest foreign carmaker in China, even as the government’s virus-busting measures decimate sales, in the face of encroaching rivals such as Tesla, which, last year, became the first foreign carmaker to wholly own a car plant.

At the end of last year when 25-million vehicles were sold in China — and just before the coronavirus was first reported in December — the government targeted 25% of 2025 annual sales to be made up of new-energy vehicles.

The deals would make VW the latest foreign carmaker to increase ownership in China since the government started to relax ownership rules in 2018 with Germany’s BMW quick to take control of its main local venture.

VW target Anhui Jianghuai, based in the eastern city of Hefei, is fully state-owned. It counts its core asset as its 25.23% stake in JAC — formally Anhui Jianghuai Automobile Group, which has a market value of $1.84bn.

The Anhui provincial office of the state-owned asset supervision and administration commission declined to comment.

After completing the deal, VW plans to invest fresh capital in its 50:50 venture with JAC and build capacity with its modular MEB platform, an architecture enabling efficient production of various EV models, said one of the people.

Direct ownership

JAC shares surged by their maximum 10% on the news on Wednesday, to trade at their highest level since mid-April last year. Shanghai-listed JAC said last week that its parent plans to bring in a strategic investor, which will not cause change in its control.

VW’s purchase of a stake in Shenzhen-listed Guoxuan, also based in Hefei, would mark it first direct ownership in a Chinese battery maker. It plans to buy about 27% of Guoxuan mostly via a discounted private share placement as well as from top shareholder Zhuhai Guoxuan Trading, which holds 18%, and founder Li Zhen, who owns 12%, said one of the people.

Son Li Chen also owns 2.5%, showed filings to the stock exchange this month.

Based on Guoxuan’s market capitalisation of $4.3bn, a 27% stake is worth $1.16bn.

Zhuhai Guoxuan and Li Zhen could not immediately be reached for comment.

Guoxuan has suspended trading of its stock since May 20 and on Tuesday said Zhuhai Guoxuan and Li Zhen would sell part of their holdings to an unidentified strategic investor. It said it will also issue shares to the investor via a private offering.

The deals have yet to be finalised and investment sizes may change as negotiations continue, the people said.

VW also has ventures with state-owned China FAW Group and SAIC Motor. It aims to sell 1.5-million new-energy vehicles a year in China by 2025.

“VW consistently searches for ways to strengthen and deepen our relationships with local partners,” the company said. “In this regard, we will explore possible options together with all stakeholders to secure long-term success.” 

Reuters