Volkswagen (OTC:VWAGY) will invest 2.1 billion euros ($2.34 billion) in two electric-vehicle-related companies in China as it prepares to capture a substantial share of growing electric-vehicle sales in the world's largest new-vehicle market, the company announced Friday.
VW said that it will invest 1 billion euros in the government-owned parent company of Anhui Jianghuai Automobile Group (often referred to as JAC Motors), in exchange for a 50% stake. VW will also take control of an ongoing joint venture with JAC under the deal, boosting its ownership of the electric-vehicle venture (called JAC Volkswagen) from 50% to 75%.
In a second transaction, VW will pay 1.1 billion euros in exchange for 26.5% of electric-vehicle battery maker Gotion High-Tech Co., Ltd., becoming its largest shareholder.
Both companies are based in Hefei, the capital city of China's Anhui province. In an interview with Reuters, VW China chief Stephan Woellenstein said that Anhui will be VW's electric-vehicle manufacturing hub in China.
The investments are the latest moves in VW's plan to build and sell 3 million electric vehicles a year by 2025. The Chinese government is aiming to have so-called "new energy vehicles" make up 25% of annual vehicle sales in China by 2025. VW, like its competitors General Motors (NYSE:GM), Toyota (NYSE:TM), Tesla (NASDAQ:TSLA), and a host of domestic Chinese automakers, hopes to capture a substantial share of that market.
In addition to its joint venture with VW, JAC Motors builds vehicles for upscale Chinese electric-vehicle maker NIO (NYSE:NIO). Last month, NIO announced a deal with economic-development authorities in Anhui in which it will move its operations to Hefei in exchange for a substantial investment.
It's not clear how or whether VW's investment in JAC will affect its relationship with NIO.