VW commits $12bn to build electric cars in ChinaHeat Profit
Listen to this article
This is an experimental feature.
Give us your feedback.
Thank you for your feedback.
What do you think?
Volkswagen will Invest €10bn ($11.8bn) to develop new-energy vehicles (NEVs) in China by 2025, its China head announced Thursday.
The European carmaker will launch 40 locally produced vehicles in China, Jochem Heizmann told reporters at the Guangzhou Auto Show. Production of electric vehicles will begin during the first half of next year with Volkswagen’s new joint venture partner Anhui Jianghuai Automobile Group (JAC Motors).
The move comes as China moves to require automakers to reach production quotas for electric vehicles. A delayed carbon trading scheme would also require carmakers to buy and sell carbon credits tied to the production of electric vehicles.
Under the scheme, the rollout of which was scheduled for 2018, EVs need to account for up to 8 per cent of vehicle sales in China. The new rules were delayed to 2019 after protests from Germany and other countries. Some auto executives also told Chinese industrial planner that they might have to reduce overall output to meet the target, according to two people familiar with the discussions.
The rules will not be enforced until 2020.
VW will initially use JAC platforms to ramp up electric car production to meet the government’s quota. “The JAC joint venture is an interim solution to hit the NEV quota but will be phased out once VW can reach it with its own technology,” says Jochen Siebert at JSC Automotive, a consultancy in Shanghai.
China has been pushing for low emissions vehicles and is planning an eventual ban on all petrol and diesel vehicles by 2040. In preparation, foreign automakers have announced electric vehicle production plans within China.
Last week, China announced a pilot scheme to ease foreign ownership restrictions for new energy or special use vehicle companies set up in free trade zones. The pilot comes shortly after Tesla confirmed plans to open a factory in Shanghai.
The Chinese government, which blames cars for about a third of the country’s air pollution, wants to boost electric vehicle production — including buses and other commercial vehicles — from 500,000 vehicles last year to 7m, including hybrids, by 2025.
While China accounts for almost half of global electric vehicle sales, they are a tiny percentage of its overall car Market, which surpassed the US as the world’s largest during the global financial crisis.
Electric cars and hybrids accounted for less than 2 per cent of automotive sales last year. Most were sold in large cities where electric car owners are exempted from lotteries and long waiting times for licence plates. Without such incentives, demand for electric cars could wane.
“There is a big worry about the healthy development of new energy vehicles as subsidies retreat,” said Sau Cheung Ma, an analyst with Guotai Junan Securities in Hong Kong. “We will need a lot [more] imported and joint venture cars to reduce the cost of electric cars.”
China’s leading domestic electric car manufacturer, BYD, reported a 20 per cent fall in sales over the first six months of this year compared with the same period in 2016 after Beijing slashed subsidies. A BYD joint venture with Daimler began selling electric Denza cars in late 2014.
Volkswagen forged its venture with state-owned JAC Motors this May with the express purpose of making electric cars and had previously stated it planned to sell 1m NEVs by 2025.
In August, Renault and Nissan joined longtime partner Dongfeng Motor to form a new electric vehicle joint venture.
Last week, Ford announced it would Invest $753m in China to manufacture and sell electric vehicles with local partner Anhui Zotye Automobile.