Volkswagen invests US$2.2b in Chinese electric vehicle sector

Volkswagen said it was 'paving the way for more electric models and infrastructure'. (Photo: AFP/Ronny Hartmann)

The German car giant said it will take a 50 per cent stake in JAG - the parent company of state-owned JAC Motors - and increase its holding in the JAC Volkswagen joint venture from 50 per cent to 75 per cent for around 1 billion euros.

The group said in a statement that "by gaining management control, Volkswagen is paving the way for more electric models and infrastructure".

It will also buy a 26 per cent share of Chinese battery supplier Gotion High-Tech for 1.1 billion euros.

China, which accounts for 40 per cent of Volkswagen's sales, has become the world's largest auto market in recent years, with Beijing repeatedly pledging to support the electric vehicle industry.

China's industry ministry said in December the country should seek to ensure one in four of all vehicles sold in 2025 were either hybrids or fully-electric vehicles.

And Beijing decided in late March to extend the tax exemption for the purchase of electric vehicles by two years.

Car sales in China began to slide in 2018 and plunged further when the coronavirus pandemic paralysed the economy, but they have rebounded as the country appears to have brought the virus under control.

The JAG investment is the first time the German carmaker will take "a strategic role in a state-owned company", Volkswagen China CEO Stephan Woellenstein said in a statement.

CAR TROUBLE

The lifting of coronavirus lockdowns in China has given the stuttering auto industry a jumpstart, with sales rising for the first time in two years as buyers return as the health crisis eases and restrictions on travel and businesses are lifted.

Sales rose 4.4 per cent year-on-year in April, according to figures from the China Association of Automobile Manufacturers, driven by strong demand for commercial vehicles, which soared more than 30 per cent.

However, the global car industry faces an existential crisis from the coronavirus pandemic, which has caused sales to plunge as governments forced citizens to stay at home to slow the spread of the virus.

The Volkswagen announcement came as French automaker Renault announced 15,000 job losses worldwide, and a day after Japanese automaker Nissan reported a huge $6.2 billion annual net loss.

Nissan, already battling weak demand as well as the fallout from the arrest of former boss Carlos Ghosn, said the global outbreak had hit all aspects of its business.

Nissan said it will shut its Barcelona plant and slash production.