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Audi To Start A JV With Chinese Auto Maker FAW To Make Electric Cars

Audi To Start A JV With Chinese Auto Maker FAW To Make Electric Cars
German auto maker Audi will make luxury electric vehicles in China in a joint venture with China's oldest carmaker FAW.
Hongqi - or Red Flag – limousines that are used by the China's communist party leaders, are among the pride products of FAW, the third largest carmaker of China. In recent years, this Chinese company has been trying to become competitive in its home market and compete with the likes of other Chinese electric vehicle makers like Geely and SAIC.
Fully-electric models of Audi cars would be made at the proposed new joint venture factory. According to Audi, this new manufacturing unit will be built in Chungchun in China's Northeast with an investment of $4.6bn which is planned start production in 2024.
"This deepened partnership between Audi and FAW heralds a new era of electrification as the next 'golden decade' for Audi on the important Chinese market," said President of Audi China Werner Eichhorn, in a press release.
With a sale of more than 700,000 vehicles in 2020, Audi considers China to be its single biggest market in the world for its vehicles. The German luxury car brand has set a target of achieving sale of electric cars making up at least one third of its total car sales in the Chinese market by 2025.
60 per cent of the joint venture will be owned by Audi and its parent company Volkswagen while the rest 40 per cent will be owned by FAW.
Models of its Audi cars are already made locally in China by FAW and its relationship with Audi and its parent company Volkswagen dates back a long way. FAW was created by Chinese Communist Party Chairman Mao Zedong in the 1950s as part of an industrialization push.
Even though in the 1980s, the demands for FAW’s premium Hongqi models, which were originally designed and made for use by diplomats and communist party officials, dropped off, the brand was revived in the 1990s due to a national policy of propping up Chinese brands,  
In 2015, during a military parade to commemorate the 70th anniversary of the end of World War II, a Hongqi limousine was ridden by China's President Xi Jinping.
In 2020, more than 3 million units of its cars, including its premium Hongqi branded ones, were sold by FAW.
Electrification of most of its Hongqi models by 2025is planned by the Chinese company.
This latest strategic move by Audi comes at a time of increased rivalry in the electric car segment of China. At the end of 2019, there were a total of 7.2 million electric cars on the roads of the world and 47 per cent of them were in China, according to the International Energy Agency. And according to the China Association of Automobile Manufacturers, the total number of electric cars sold in China will reach about 1.8 million by the end of the current year.
It is likely that the joint venture between FAW and Audi will compete with BMW which operates its own joint venture for making electric vehicles with Great Wall Motors, the Chinese sports utility vehicle maker.
Another major competitor will be Tesla. Further competition will also come from local start- like Nio, Aiways, XPeng, Li Auto and WM Motor.

Christopher J. Mitchell

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