AutoBeta(AutoBeta.net)03/18 Report--

The 34-year-old joint venture in China has experienced "upheaval".

Volkswagen Group revealed a major news at the annual meeting of its headquarters in Germany that it plans to increase its stake in a joint venture in China. In view of the fact that China has announced that the restrictions on the share ratio of joint ventures will be lifted in 2022, Volkswagen CEO Dis announced at the annual meeting that it is currently considering increasing its stake in the joint venture in China, and the results will be announced at the end of 2019 or the first half of 2010. Volkswagen also said that if we can achieve the adjustment of the stock ratio is of course the best.

At present, Volkswagen has three vehicle manufacturers in China, including FAW-Volkswagen, SAIC-Volkswagen and Jianghuai Volkswagen. SAIC, a partner, took the lead in expressing dissatisfaction with the equity ratio of the joint venture, publicly criticizing not only Volkswagen's unauthorized comments on increasing its stake, but also its voice in the joint venture.

On March 18, SAIC issued an official statement that SAIC regretted Volkswagen's unilateral statement on the major issues of its joint venture in China, and the misunderstanding between the two sides had been cleared up after communication. SAIC has not discussed the issue of "adjusting the stock ratio" with Volkswagen Group, and Volkswagen Group has not formally put forward a plan to discuss the stock ratio with SAIC.

Whether foreign shareholders will propose to "adjust the share ratio" depends on the specific circumstances of each joint venture and on the voice and contribution of Chinese shareholders in the joint venture, the statement said. In the process of long-term joint venture and cooperation, both SAIC and Volkswagen have made great contributions to the development of the joint venture and have the same say on the important issues of the joint venture. and is accelerating the promotion of a larger scope, higher level, deeper level of joint venture and cooperation.

It was also revealed that the joint venture is deepening cooperation, SAIC-Volkswagen's new MEB new energy vehicle plant has started construction, and SAIC Audi project is moving forward as planned.

SAIC indicated that major decisions related to the future development of the joint venture, such as the adjustment of the share ratio of the joint venture, must be decided by both sides through consultation, and that the foreign side of this cooperation unilaterally declared its position on major issues of the joint venture in China without prior communication. SAIC regrets. Afterwards, senior officials of the two sides communicated, and Volkswagen Group restored the situation to SAIC to clarify the facts and eliminate misunderstandings.

Volkswagen did not have any prior discussion with the joint venture partner and disclosed the information of increasing its stake to the global market at the group's annual meeting, which did not seem to take the joint venture partner seriously, and sent an early signal that Volkswagen intended to take control. SAIC's official statement also made it clear to Volkswagen.

As we all know, China is the most important and core market of Volkswagen Group, accounting for 38.8% of Volkswagen's global sales in 2018, reaching 4.207 million vehicles. The Chinese market contributes huge sales and profits to Volkswagen. Because of joint venture restrictions, Volkswagen must share half of its profits with Chinese partners in China. Now that the state policy supports the opening of shares in the auto industry, Volkswagen must want to have more say and take more profits.

The key is on the question of whether SAIC will release it and what benefits it will get after opening up.

Referring to brilliance BMW, BMW has confirmed that it will take a 75 per cent controlling stake in the joint venture three years later, and BMW has accepted brilliance's terms. According to Qi Yumin, chairman of brilliance Group, first, BMW wants to ensure that after brilliance changes from 50% to 25%, 25% must gain more economic benefits than it does now; second, brilliance also signed an agreement with BMW. BMW must support brilliance's own brand in four aspects: research and development, manufacturing, quality and sales.

In the end, brilliance sold a 25% stake in BMW for 35 billion, and BMW increased its investment in China and decided to make a domestic BMW X5 model.

In contrast, SAIC's own brand is more likely to get technical support from SAIC GM. If Volkswagen increases its stake in SAIC Volkswagen, how can SAIC guarantee its own greater economic interests? These will require in-depth negotiations between the two sides before further results can be achieved.

SAIC-Volkswagen, founded in 1985, is the first car joint venture in China. SAIC Volkswagen sold 2.06 million vehicles in 2018, and its cumulative sales exceeded 20 million in January this year. In the future, it will form the production and sales of Volkswagen brand, Skoda brand and Audi brand. SAIC-Volkswagen sales declined from January to February, with cumulative sales of 301000 vehicles down 10.4 per cent from a year earlier.

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