Volkswagen strengthens investment as China continues opening up

German carmaker Volkswagen has announced plans to invest 2.1 billion euros (about $2.3 billion) in China to develop its electric vehicle business in the country.

With an investment of 1 billion euros, Volkswagen will acquire 50 percent of JAG, the parent company of Anhui Jianghuai Automobile Group Corp Ltd (JAC Motors), and increase its stake in JAC Volkswagen to 75 percent, according to the agreement signed in Beijing on May 29.

In another transaction, Volkswagen will pay 1.1 billion euros to acquire a 26.47-percent share of Gotion High-tech Co Ltd, a Hefei-based manufacturer of electric batteries, becoming the latter's largest shareholder.

Volkswagen is the first foreign automobile company to invest directly in a Chinese battery manufacturing enterprise. The investment is expected to be completed by the end of 2020, according to Gotion.

The two sides will carry out strategic cooperation in the field of electric vehicle batteries. Gotion will become a certified supplier of Volkswagen.

The cooperation between Volkswagen and Gotion has created a new model for the development of China's new energy automobile industry, and will further enhance the competitiveness of Gotion in the global battery industry, said Li Zhen, president of Gotion.

Herbert Diess, CEO of Volkswagen AG, said the company, together with strong and reliable partners, is strengthening its electrification strategy in China. Its electric car business is growing rapidly and offers a great deal of potential for JAC Volkswagen.

By opening up the market, China is giving Volkswagen new business opportunities, said Stephan Wollenstein, CEO of Volkswagen Group China.

Wollenstein added that in addition to investments of more than 2 billion euros in JAC and Gotion, Volkswagen also has plans to invest 4 billion euros in China this year.

According to its development plan, Volkswagen Group China expects to deliver around 1.5 million new energy vehicles (NEVs) to Chinese customers in 2025.

The two deals came as China highlighted the importance of new infrastructure construction in this year's government report, saying China will expand 5G applications and build more charging facilities to promote the wider use of NEVs.

To support the development of the NEV industry in the wake of the COVID-19 epidemic, China has decided to extend subsidies and tax exemptions for NEV purchases by another two years to restore NEV production and sales, Minister of Industry and Information Technology Miao Wei said on the sidelines of the annual national legislative session.

"NEV production capacity in April had basically reached the level of the same period last year," Miao said, adding the ministry is confident in the future development of the industry.

The ministry will also step up the construction of charging facilities and enhance their interconnectivity, Miao said.

According to statistics from the Ministry of Public Security, by the end of 2019, the number of NEVs in China had reached 3.81 million. This number had grown by more than 1 million for two consecutive years, showing a rapid growth trend.

The number of charging posts across the country rose to around 1.29 million by the end of April, according to data from the Electric Vehicle Charging Infrastructure Promotion Alliance.

This represents a year-on-year growth of 35 percent and was 20,000 higher from the end of March, the alliance said.