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Customer LoginsDaimler, VW announce strategic partnership plans to develop EVs in China
German automakers Daimler and Volkswagen (VW) are scaling up their initiatives in China as they look to capture a greater share of the country's electric vehicle (EV) market.
IHS Markit Perspective:
- Significance: German automakers Daimler and Volkswagen (VW) have signed agreements to develop and manufacture EVs in China.
- Implications: VW has entered in a 50-50 joint venture (JV) with Anhui Jianghuai Automobile Company (JAC) to develop, produce, and market EVs and mobility services in the country. Separately, Daimler and BAIC Group have agreed to strengthen their strategic partnership through signing a framework agreement for investments in area of NEVs in China.
- Outlook: The latest moves by the German automakers come amid China's emergence as one of the key markets for the sale and development of NEVs. It is also in line with the Chinese government's strategy of ramping up investments in developing and encouraging use of clean energy. China's NEV market is attracting a number of new players as the government has relaxed its production licence-granting policy for companies producing only NEVs.
German automakers Daimler and Volkswagen (VW) are scaling up their initiatives in China as they look to take a greater share of the country's electric vehicle (EV) market. In the presence of German chancellor Angela Merkel and Chinese premier Li Keqiang, the automakers signed separate agreements to develop and manufacture EVs in China. The agreements were signed during the state visit of Premier Li Keqiang to Berlin, Germany, this week.
VW entered into a 50-50 joint venture (JV) with Anhui Jianghuai Automobile Company (JAC) yesterday (1 June). The new JAC-VW company will develop, produce, and market EVs and mobility services in China. In addition, under the new agreement, the automakers will seek to establish a factory as well as a research and development (R&D) centre in China. The JV will also undertake the development and production of components for new energy vehicles (NEVs), and the development of vehicle connectivity solutions and automotive data services. The new JV will be based in Hefei in Anhui province. Commenting on the agreement, Matthias Müller, CEO of VW Group, said, "The new partnership is a further milestone in our electric offensive in China. Just as we have played a key role in shaping mobility together with our partners in China over the past 30 years or more, we want to play our part in shaping the mobility of the future: electric, fully networked and in line with the needs of our customers." Under China's legal framework, the new JV will use the technical and commercial advantages of the two parties in an all-round co-operation that will cover NEVs for the mass market, according to JAC's announcement.
An agreement was also signed between Daimler AG and Beijing Automotive Industry Holding Co (BAIC Group) on increasing investment and strengthening strategic co-operation on NEVs. Daimler and BAIC have agreed to strengthen their strategic partnership through signing a framework agreement on NEV investments in China, according to a press release by Daimler on 1 June. Under the agreement, Daimler will become a minority shareholder in BAIC's NEV subsidiary, Beijing Electric Vehicle Co. The company will also invest in upgrading the production capability of their JV Beijing Benz Automotive Co to include production of NEVs. "The framework agreement signed today marks a new chapter of our co-operation in terms of NEVs. China today is already the world's largest market for NEVs, and Daimler is committed to contributing to the further development of electric mobility in this country," said Hubertus Troska, Daimler AG management board member responsible for Greater China.
Outlook and implications
The latest moves by the German automakers come as China emerges as one of the key markets for the development and sale of NEVs. It is also in line with the Chinese government's strategy of ramping up investments in developing and encouraging use of clean energy. China's NEV market is attracting a number of new players as the government has relaxed its stringent production licence-granting policy for companies that will only produce NEVs. This has seen a number of new entrants to the arena.
VW and JAC began talks to set up a JV company in 2016 and received regulatory approval from China's National Development and Reform Commission (NDRC) last month. VW and JAC also have in place approvals from the local authorities in Anhui province. According to a statement sent to IHS Markit earlier this year, the German automaker is planning to start production next year with JAC. Chinese media reports stated earlier this year that the models produced will include a sport utility vehicle (SUV) and that the brand will be the VW budget brand. VW and JAC have yet to announce the new brand under the JAC-VW JV.
VW aims to sell some 1.5 million electric cars per year in China by 2025, and currently has two large JVs in China with SAIC Motor and FAW Group. The latest deal with JAC Motor is expected to help the automaker to achieve this goal.
BAIC has been Daimler's strategic partner in China for more than a decade. In 2005, the two automakers formed a JV, called Beijing Benz Automotive Co (BBAC), to produce Mercedes-Benz models in China. Currently, the JV produces Mercedes-Benz C-Class, E-Class, GLA, and GLC models, as well as Mercedes-Benz's 4- and 6-cylinder engines in China. In 2016, the locally produced models accounted for over two-thirds of Mercedes-Benz's sales in China. The JV reportedly produced more than 300,000 vehicles in 2016, an increase of nearly 30% year on year. The new agreement is expected to further help increase the level of localisation in the new electric models that Daimler is planning to launch in China. "Localisation is the key to Daimler's sustainable growth and future success here in China. We have been intensifying local research and development, as well as local production, to highlight the preferences of our Chinese customers," said Troska.
About this Article
The above article is from AutoIntelligence Daily by IHS Markit. AutoIntelligence Daily provides same-day analysis of automotive news, events and trends. Get a free trial.