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Volkswagen Will Take Up 20% Stake InChinese Battery Maker Guoxuan

Volkswagen Will Take Up 20% Stake InChinese Battery Maker Guoxuan
With the aim of pushing itself further into the Chinese market – the largest auto market of the world, German car maker Volkswagen AG is slated to strike a partnership with Chinese electric vehicle battery maker Guoxuan High-tech Co Ltd through taking up a 20 per cent stake in the Chinese firm, said a report from Reuters news agency.
This would be the first time that Volkswagen would hold direct ownership in a Chinese battery company. This move also coincides with the aim of the Wolfsburg, Germany based car maker to meet its target of achieving sale of 1.5 million new energy vehicles (NEVs) annually in the Chinese market by 2025 -0 which would also include plug-in hybrid cars.
The Reuters report claimed that a discounted private share placement would be used in the coming weeks to acquire the stake in Shenzhen-listed Guoxuanby thetop foreign automaker in China. The worth of a 20 per cent stake in Guoxuan at present is about $560 million calculate on the basis of the company’s market capitalization of $2.8 billion.
The report also claimed that the term and conditions of the deal have been almost finalized and the tow companies are awaiting the kicking in of the a set of new Chinese regulatory rules on private share placements. These new regulations are expected to offer a more flexible pricing mechanism and shorter lock-up periods for majority shareholders.
After completion of the transfer of the 20 per cent stake of Guoxuan, Volkswagen would become the second largest shareholder of the company with Zhuhai Guoxuan Trading Ltd, a company under the control of Guoxuan’s founder Li Zhen with a 25 per cent share of the company.
Within the Chinese battery industry, Guoxuan is considered to be placed in the mid-tier, behind companies like CATL and BYD. The company is headquartered in China’s eastern city of Hefei which is also the place where Volkswagen is also developing electric vehicles in partnership with JAC Motor - one of the number of joint venture partners in China of Volkswagen.
It has been a long standing desire of Volkswagen to take control of a battery maker so that it is able to better manage its supply chain, claimed the report quoting a source with knowledge of the matter.
No comments about the deal were available from Volkswagen, Guoxuan and the China Securities Regulatory Commission.
A new $2.5 billion electric vehicle plant with its Chinese joint venture partner SAIC Motor is being built by Volkswagen as a part of achieving its goal of VEC sale in China. This new facility is expected to have an annual production capacity of about 300,000 cars. Volkswagen is also modernizing its manufacturing units in China’s southeastern city of Foshanso that it can accommodate the manufacturing of electric cars in partnership with FAW Group.
“By holding a stake in the top Chinese battery makers, carmakers can gain more bargaining power on battery prices,” said Yale Zhang, managing director of Shanghai-based consultancy AutoForesight. “Foreign carmakers are now catching up with their Chinese counterparts on securing battery supplies in China.”

Christopher J. Mitchell

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