German based and world leading automaker Volkswagen AG (VOWG) is in the brink of sealing deals with two Chinese electric vehicle companies namely Anhui Jianghuai Automobile Group Holding and an EV battery manufacturer Guoxuan High-tech Co Ltd (002074).
Sources have revealed that Volkswagen is set to part with 3.5 billion yuan ($491 million) to acquire 50% stake in Anhui Jianghuai which is the parent company of JAC Motors (600418).
Additionally the automaker will become the largest shareholder in Guoxuan but the size of investment is yet to be agreed upon. Anhui Jianghuai is fully owned by the state and it owns 25% stake in JAC which has a market value of $1.84 billion.
Currently, Volkswagen is the largest foreign automaker in China, a position the company will definitely retain if the deals are closed. In 2019 Volkswagen sold 25 million cars in China. Shortly before outbreak of coronavirus, Volkswagen had anticipated on increasing sales in China by 25% by 2025.
Chinese government has always maintained stringent rules for foreign automakers interested in ownership in Chinese companies. However, for the past two years Beijing has been loosening these rules allowing foreign entities to invest in local companies with less rules.
“Volkswagen consistently searches for ways to strengthen and deepen our relationships with local partners. In this regard we will explore possible options together with all stakeholders to secure long-term success,” said VW regarding the investments.
Analysts are saying if above deals are closed then Volkswagen will end up being the latest foreign automaker to increase ownership in Chinese firms after its rival BMW AG (BMWG) took the same route.