AutoBeta(AutoBeta.net)05/27 Report--

Volkswagen Group is in final talks to acquire a 50 per cent stake in Jianghuai Automobile Group Holdings Co., Ltd., worth at least 3.5 billion yuan, Reuters reported. Affected by the news, Jianghuai Motor shares rose by the daily limit in the afternoon, reaching a new high since mid-April last year.

If the deal is successfully completed, Volkswagen plans to inject new capital into the joint venture with JAC Motor at a ratio of 50:50 to create capacity based on its MEB modular electric vehicle manufacturing platform.

In fact, JAC and Volkswagen cooperated as early as 2017. In June 2017, JAC signed a joint venture agreement and investment agreement with Volkswagen Group to establish Jianghuai Volkswagen Co., Ltd., and in December 2017, the two sides signed a memorandum planning to set up a joint venture company for light commercial vehicles.

In November 2019, Jianghuai Volkswagen Group (China), Anhui Jianghuai Automobile Group Co., Ltd. and Seattle signed a memorandum of understanding in Spain. According to the agreement, Jianghuai Volkswagen will jointly develop an electric vehicle platform and introduce the Seattle brand by 2021.

However, the cooperation between the two sides is not smooth. Only one Sihao E20X has been launched since Jianghuai signed a contract with Volkswagen, and sales of the E20X have been only 3000 for more than half a year, from December last year to April this year. In addition, Volkswagen Group took over the new entry-level electric vehicle development project from its brand Seattle in early May, and the cancellation of the Seattle project means that the development of Volkswagen and Jianghuai joint venture JAC Volkswagen has changed.

In addition, a person familiar with the matter revealed that Volkswagen will become the largest shareholder of Guoxuan Hi-Tech, its equity acquisition through discounted private placement and purchase from Zhuhai Guoxuan Trading Co., Ltd., the largest shareholder of Guoxuan Hi-Tech, and founder Li Gong.

In fact, as early as April 21, it was revealed that Volkswagen had acquired Guoxuan Hi-Tech shares, and then Guoxuan Hi-Tech issued a notice clarifying that it had not yet reached an agreement on specific cooperation with Volkswagen Group and signed any substantive binding agreement.

Data show that Guoxuan Hi-Tech is one of the battery manufacturers in China, and its independent battery installed capacity in 2019 is 3.22GWh, second only to Ningde Times and BYD.

It is worth mentioning that Guoxuan Hi-Tech is also the power battery supplier of Jianghuai Automobile. In October 2018, Guoxuan Hi-Tech signed a strategic cooperation agreement with Jianghuai Automobile to further ensure the former's stable supply of power battery system for Jianghuai Automobile.

Behind the news of Volkswagen's acquisition of Jianghuai Automobile and Guoxuan Hi-Tech is the impact of Volkswagen Group's absolute position in the Chinese market. Last year Tesla became the first foreign car company to build a wholly-owned factory in China, which has contributed to the position of Volkswagen Group, which is eager to maintain its position as the largest foreign carmaker in the Chinese market.

In addition, Volkswagen Group has established joint ventures with FAW and SAIC in China, and its cooperation with Jianghuai Automobile and Guoxuan Hi-Tech reflects, to some extent, the acceleration of Volkswagen Group's electrification strategy in China. Feng Sihan, CEO of Volkswagen China, has said it plans to produce 22 million pure electric vehicles by 2028, more than half of which will be made in China. Volkswagen Group CEO Dis said that by 2035, half of Volkswagen's sales in China will be new energy vehicles.

The acquisition of Jianghuai, or its expansion of production capacity, to achieve electrification strategy is one of the best options, and the ownership of electric car battery manufacturer Guoxuan Hi-Tech is likely to be its supporting project. Volkswagen, Jianghuai Automobile and Guoxuan Tech all declined to comment on the above news, but some Jianghuai employees confirmed that the cooperation under discussion was indeed with Volkswagen, but did not know the specific progress of the cooperation between the two sides.

The deal has not yet been finalised and the size of the investment is likely to change as negotiations continue, and the results of the deal will be announced as soon as Friday.

Welcome to subscribe to the WeChat public account "Automotive Industry Focus" to get the first-hand insider information on the automotive industry and talk about things in the automotive circle. Welcome to break the news! WeChat ID autoWechat