Volkswagen in final talks to seal biggest M&A deals in China EV sector

A worker wears a protective mask at the final assembly line for the electric Volkswagen model ID.3 in Zwickau, Germany. REUTERS

Volkswagen AG is in final talks to seal its largest investment deals with Chinese electric vehicle (EV) firms, two sources said, as the German automaker accelerates its push into the world’s largest market for environmentally friendlier cars.

The firm is poised to buy 50 percent of Anhui Jianghuai Automobile Group Holding, the parent of EV partner JAC Motors, for at least 3.5 billion yuan ($491 million), the people said on condition of anonymity as the matter was private.

It is also set to become the biggest shareholder of EV battery maker Guoxuan High-tech Co Ltd, the people said, adding both deals could be announced as early as Friday.

Volkswagen declined to comment on the deals, details of which are reported here for the first time. JAC and Guoxuan declined to comment.

The deals highlight how Volkswagen is keen to retain its status as the largest foreign automaker in China even as government virus-busting measures decimate sales, in the face of encroaching rivals such as Tesla Inc which last year became the first foreign automaker to wholly own a car plant.

A Volkswagen electric ID car is seen during a construction completion event of SAIC Volkswagen MEB electric vehicle plant in Shanghai, China. REUTERS

At the end of last year when 25 million vehicles were sold in China — and just before the coronavirus was first reported in December — the government targeted 25 percent of 2025 annual vehicle sales to be made up of new energy vehicles.

The deals would make Volkswagen the latest foreign automaker to increase ownership in China since the government started to relax ownership rules in 2018, with Germany’s BMW AG quick to take control of its main local venture.

Volkswagen target Anhui Jianghuai, based in the eastern city of Hefei, is fully state owned. It counts its core asset as its 25.23 percent stake in JAC — formally Anhui Jianghuai Automobile Group Corp Ltd, which has a market value of $1.84 billion.

The Anhui provincial office of the State-owned Asset Supervision and Administration Commission declined to comment.

After completing the deal, Volkswagen plans to invest fresh capital in its 50:50 venture with JAC and build capacity with its modular MEB platform, an architecture enabling efficient production of various EV models, said one of the people.

New cars drive during a ceremony marking start of the production of a new electric Volkswagen model ID.3 in Zwickau, Germany. REUTERS

JAC shares surged by their maximum 10 percent on the news on Wednesday, to trade at their highest level since mid-April last year.

Shanghai-listed JAC last week said its parent planned to bring in a strategic investor, which will not cause change in its control.

Volkswagen’s purchase of a stake in Shenzhen-listed Guoxuan, also based in Hefei, would mark it first direct ownership in a Chinese battery maker.

It plans to buy about 27 percent of Guoxuan mostly via a discounted private share placement as well as from top shareholder Zhuhai Guoxuan Trading Ltd, which holds 18 percent, and founder Li Zhen, who owns 12 percent, said one of the people. Son Li Chen also owns 2.5 percent, showed filings to the stock exchange this month.

Based on Guoxuan’s market capitalisation of $4.3 billion, a 27 percent stake is worth $1.16 billion.

Zhuhai Guoxuan and Li Zhen could not immediately be reached for comment.

A Hyundai Motor’s electric car IONIQ is charged at a electric charging station in Seoul, South Korea. REUTERS

Guoxuan has suspended trading of its stock since May 20 and on Tuesday said Zhuhai Guoxuan and Li Zhen would sell part of their holdings to an unidentified strategic investor. It said it will also issue shares to the investor via a private offering.

The deals have yet to be finalised and investment sizes may change as negotiations continue, the people said.

Volkswagen also has ventures with state-owned China FAW Group Corp Ltd and SAIC Motor Corp Ltd. It aims to sell 1.5 million new energy vehicles a year in China by 2025.

“Volkswagen consistently searches for ways to strengthen and deepen our relationships with local partners,” Volkswagen told Reuters. “In this regard we will explore possible options together with all stakeholders to secure long-term success.” (REUTERS)

Related post

2022 KTM Adventure 390 launched in India

KTM has officially revealed the updates on the Adventure 390. The all-new 2022 Adventure 390 comes with major upgrades to the bodywork and features, such as the addition of two-mode traction control: street mode and off-road mode.

Read More

TVS Ntorq 125 XT launched in India

TVS Motor Company has launched its new scooter–the Ntorq XT–in India. The newly launched scooter is the company’s most expensive model in its Ntorq-125 series. The XT is based on Ntorq’s disc brake variant, but comes loaded with new features and technology. The scooter has been launched in India at a starting price of INR 1.03 lakh.

Read More

Ioniq 5, Kia EV6, and Taigun nominated for the 2022 World Car Awards

The Hyundai Ioniq 5, Kia EV6, and Volkswagen Taigun have all made it to the 2022 World Car Finals in their respective categories. The Ioniq 5 has been nominated in three different categories, the EV6 in two, and the Taigun in one.

Read More

GWM Haval H6 earns five-star ANCAP safety rating

Great Wall Motor’s (GWM) HAVAL H6 has received high scores in the rigorous Australasian New Car Assessment Program (ANCAP) crash test,

Read More

Komaki debuts in Nepal with two electric scooters–the Venice and the SE

Komaki Electric Vehicles, the Delhi-based EV maker, has debuted in Nepal with the launch of two electric scooter models: the Venice and the SE. Unity Trading Concern Pvt. Ltd has taken the role of distributing the Komaki Electric vehicles in the country. Design The Venice, a retro-styled scooter, comes with a circular LED headlight, LED […]

Read More

Shadow Top Brand Shadow