Volkswagen (VWAGY) has struck a deal to invest $2.3 billion in two separate Chinese electric vehicle (EV) businesses. It's seeking to fortify its position in the world's biggest auto market. Volkswagen stock fell though.
XThe move saw it buy 50% of Anhui Jianghuai Automobile Group Holding, parent of EV partner JAC Motors. The company had been entirely state-owned. Volkswagen will also become the biggest shareholder of EV battery maker Guoxuan High-tech.
The German auto giant will have full management control of its JAC-VW joint venture, Reuters reported, citing the company's China CEO Stephan Wollenstein.
The executive also said production of electric vehicles based on its Modular Electric Propulsion (MEP) platform will start at the JAC-VW venture in 2023.
It is a modular car platform for EVs developed by Volkswagen. It is already used in Audi, SEAT, Skoda and Volkswagen models. Its purpose is to consolidate electronic controls and reduce the number of microprocessors used.
VW has set ambitious EV goals. In December, it laid out plans to produce 1 million electric cars by 2023. That's two years earlier than it previously forecast. From there, it plans to ramp up to 1.5 million electric cars by 2025.
Volkswagen Stock Slips
Volkswagen stock closed down 3% at 15.78. Among other auto stocks, Tesla (TSLA) rallied 3.6%, Ford (F) lost 2.4%, General Motors (GM) gave up 3% and Fiat Chrysler (FCAU) slipped 1.4%.
Volkswagen is the largest foreign automaker in China. But it is battling new rivals, such as Tesla, which became the first foreign automaker to wholly own a car plant last year in the world's biggest auto market.
Giga Shanghai, also called Gigafactory 3, delivered its first vehicles in December. Flamboyant CEO Elon Musk plans to build at least 1,000 of its Model 3s each week in the Chinese factory. It helps the company avoid higher import tariffs imposed on U.S.-made cars.
China is a massive market for EVs, with the government last year setting a target of 25% of annual vehicle sales to be made up of new energy vehicles by 2025. In total, automobile industry sales reached 25 million units in China in 2019.
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