AutoBeta(AutoBeta.net)05/29 Report--

On the morning of May 29, Jianghuai Automobile announced that Anhui SASAC, Volkswagen China Investment and Jiang Auto Holdings signed a letter of intent on increasing capital to Anhui Jianghuai Automobile Group Holdings Co., Ltd. According to the announcement, Volkswagen China will acquire a 50% stake in Anhui Jianghuai Automobile Group Holdings Co., Ltd. by means of capital increase by December 31, 2020 (or another date agreed by the parties). Anhui SASAC holds the remaining 50% stake and will still control the company.

According to the JAC announcement, after Volkswagen Group acquires a 75% stake in the joint venture, Volkswagen Group will award the joint venture Volkswagen Group's mainstream brands and a series of new energy products. The size of the joint venture will reach an annual output of 35-400000 vehicles in 2029. The total investment of the project is expected to reach 1 billion euros or the equivalent of RMB. In addition, as a result of the capital increase of the joint venture, Volkswagen's stake in the joint venture has increased from 50% to 75%.

In fact, as early as a few days ago, it was reported that Volkswagen Group had acquired Jianghuai Motor. On May 20, Jianghuai Automobile shares soared. Subsequently, it was reported that Volkswagen Group planned to buy Jianghuai Motor. On May 22, Jianghuai Automobile announced that after a written inquiry to the company's controlling shareholder, JAC Holdings, JAC Holdings is planning to introduce strategic investors. The introduction of strategic investors by JAC Holdings does not involve the change of control of the company, and the final plan has not yet been formed, and there is still significant uncertainty in this matter, which does not affect the current production and operation of the company.

In fact, Jianghuai Motors has a long history of cooperation with Volkswagen Group. As early as June 2017, Jianghuai Motors signed a joint venture agreement and investment agreement with Volkswagen Group to establish "Jianghuai Volkswagen Automobile Co., Ltd." engaged in new energy vehicle research and development and manufacturing and other business, opened the prelude to the joint venture and cooperation between the two automobile groups. In 2018, Volkswagen Group signed an agreement with Jianghuai Automobile and Seattle, which plans to introduce the Seattle brand to the Chinese market from 2020 to 2021. In April this year, Volkswagen Group suddenly cancelled Seattle's entry into China and gave its entry-level MEB pure electric project to the Volkswagen brand. At that time, some people in the industry speculated that the cancellation of the Seattle project might lead to the shelving of Jianghuai's cooperation with Volkswagen.

Coincidentally, Guoxuan Hi-Tech, China's third largest power battery company, also had stock anomalies on May 20. Guoxuan Hi-Tech once issued a stock suspension notice, saying that the company's largest shareholder and actual controller may change. and the industry also speculated that Volkswagen planned to increase its capital to Guoxuan Tech, so it became the largest shareholder of Guoxuan Tech.

On the evening of May 28, Guoxuan Hi-Tech announced that the company intends to introduce Volkswagen (China) Investment Co., Ltd. as a strategic investor. Zhuhai Guoxuan, the controlling shareholder of Guoxuan Hi-Tech, and Li Han, the controller, transfer 5% of Guoxuan Hi-Tech to Volkswagen China. According to the agreement, Volkswagen China will hold 26.47% of Guoxuan Hi-Tech, making it the largest shareholder of Guoxuan Hi-Tech, while Li Gong and United Action will be the second largest shareholder.

In fact, it was exposed as early as last year about Volkswagen's stake in Guoxuan Tech. In April 2019, Guoxuan Hi-Tech revealed that it was in talks with first-tier international brands and did not disclose details because of the signing of a confidentiality agreement. In August 2019, there were media reports that Volkswagen would invest in Chinese power battery manufacturers, and Guoxuan Tech was one of the targets. In January this year, foreign media reported that Volkswagen would acquire 20% of Guoxuan Hi-Tech, thus accelerating its development of electrification in China. Neither Volkswagen nor Guoxuan Tech clearly indicated the authenticity of the report, and then the news of the cooperation between the two sides faded out of sight.

On April 21, another source said that Volkswagen had been approved by the board of directors for the acquisition of Guoxuan Hi-Tech shares and would become the largest shareholder in Guoxuan Hi-Tech by means of private placement and equity transfer. However, after the news came out, Guoxuan Hi-Tech once again denied the authenticity of the news. However, the two suspensions of Guoxuan Hi-Tech and the possible changes of the company's largest shareholder have also made it more believed that Volkswagen is the next owner of Guoxuan Hi-Tech. With the announcement of Guoxuan Hi-Tech last night, the rumor that Volkswagen owns Guoxuan Hi-Tech has become a reality.

Why does Volkswagen like Jianghuai Automobile and Guoxuan Hi-Tech? In the final analysis, it is to expand production capacity and speed up the electrification process.

Volkswagen has three joint ventures in China, namely SAIC Volkswagen, FAW Volkswagen and JAC Volkswagen. SAIC Volkswagen and FAW Volkswagen account for the vast majority of Volkswagen sales, while JAC Volkswagen has launched only one model so far and its sales are terrible. Although Volkswagen Group has a great advantage in sales in the Chinese market, the absolute position of Volkswagen in the Chinese market has been threatened with Tesla's wholly-owned factory in China and the growth of Toyota's sales in China. Therefore, to increase cooperation with Jianghuai Automobile is not only to stabilize its position in the Chinese market, but also for the development of electrification process.

For Volkswagen, promoting the electrification process is one of the important layout strategies in recent years, and entering Guoxuan Hi-Tech or part of the electrification process.

At present, Volkswagen's power battery suppliers include Ningde Times, Sweden's Northvolt, South Korea's SKI, Samsung SDI and LG Chemistry. In the Chinese market, it mainly relies on Ningde era's battery supply, but Ningde Times not only supplies batteries to Volkswagen, but also supplies SAIC and Guangzhou Automobile. Geely, Daimler and other car companies provide battery supply, affecting the product premium and battery supply to a certain extent. In addition, Guoxuan Hi-Tech is also the main battery supplier of Jianghuai Automobile. After the establishment of a joint venture between Jianghuai Automobile and Volkswagen, it has achieved co-line production, so the relationship between Volkswagen and JAC is quite close. After Volkswagen became the largest shareholder of Guoxuan Hi-Tech, by controlling the cost and production capacity of the production side, Volkswagen can reduce the cost of new energy vehicles and ease the tension of power battery supply in the future. Volkswagen has been neck-and-neck with Toyota for years, but Volkswagen has been left behind by Toyota in terms of profitability.

'We currently have three joint ventures in China and we are also considering how to strengthen our position in China in the future, but this does not affect our recent development in China, 'said Volkswagen CEO Dis.

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