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Driving the Future: Volkswagen’s Bold Move into China’s Electric Car Market

Daniel Kim Views  

Reuters/Yonhap

Amid the rapid growth of electric vehicles (EV) in China, global automakers are investing in Chinese companies receiving technology in reverse. Overseas automakers were forced to establish a joint venture (JV) to enter China and were concerned about technology theft, so they sought help from local firms to tap into the world’s largest EV market.

According to Chinese economic media Chai Xin on May 2, Volkswagen Group, which acquired a stake in Xpeng last year, recently announced, “To secure more Chinese customers, we will take an aggressive move in China through cost reduction, technology competitiveness enhancement, and deepening local partnerships.”

Volkswagen has been increasing its investment to strengthen its position in the Chinese electric vehicle market as global sales of EVs fell short of expectations and acquired a 4.99% stake in Xpeng for $700 million in July last year. The company plans to develop at least two battery-powered models in cooperation with Xpeng, with the first to be released in China around next year. Yang Jing, director of the credit rating agency Fitch, assessed, “The cooperation with Xpeng will help Volkswagen localize electric vehicles to enter the Chinese market while offsetting the slow progress in developing automobile software.” The automotive industry believes that cooperation between the two companies was established after Volkswagen encountered difficulties developing its innovative cockpit system and autonomous driving software.

Stellantis, which includes Chrysler, Fiat, Jeep, and Peugeot, also invested 1.5 billion euros last October to acquire a 21.2% stake in Lingpao (Leintelligentor). The two companies formed a separate JV with a 51:49 equity ratio and plan to launch an EV in the second half of this year.

Until the automobile industry developed, China forced foreign companies to establish JVs with Chinese companies. This regulation was gradually abolished in 2022. Global automakers have recently extended their hands to Chinese EV and IT companies. They desperately need cooperation with Chinese companies, the world’s largest electric vehicle market, and rapidly growing autonomous driving technology. The recent Beijing Motor Show has led to an increase in cooperation with Chinese companies. Hyundai and Kia signed a ‘Strategic Cooperation MOU for Chinese Connected Cars’ with Baidu Group, while Toyota partnered with Tencent and Nissan with Baidu in AI and smart cars.

Daniel Kim
content@viewusglobal.com

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