Volkswagen extends joint venture with FAW to 2041

Article by Christian Andrei, on October 13, 2014

As it pushes to grab a larger share of the auto market in China, Volkswagen agreed to extend its joint venture with FAW Group Corp. by 25 years. Under the new agreement, Volkswagen and FAW will "significantly expand" existing r&d activities in China while into new business areas particularly on alternative drive technologies, VW said in a statement that the current agreement with FAW will expire in 2016, but has been extended to 2041.

The German carmaker announced in July it will make a EUR2 billion investment with FAW to build two more assembly sites in China. As of late, VW operates eight car-making sites and nine component facilities in China. VW also recently announced it would make a EUR100 million ($126 million) invest with SAIC Motor Corp. in the Shanghai Volkswagen proving ground in Xinjiang province, western China.

VW also has a joint venture in China with SAIC. The German carmaker has seen significant gains in China, which has helped it offset slow recovery in Europe and slumping sales in other emerging countries.

In fact, VW sees China – its biggest sales region and important earnings contributor -- as crucial to its goal of becoming the largest carmaker in the world by 2018, effectively dethroning current leader Toyota Motor Corp. Juergen Pieper, an analyst at Bankhaus Metzler, remarked that improving links with its partners in China is a must for VW since the German carmaker is “overly dependent on the market."

China accounted for a third of its global deliveries in 2013, with around 3.3 million cars sold in the country in the period. For the current year so far, VW Group – including its Audi and Porsche brands – posted a 15-percent jump in deliveries in China to 2.72 million vehicles. [source: VW]

Topics: vw, faw, joint venture

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