Volkswagen And JAC Sign MOU For Joint Collaboration Of EVs In China
Landmark agreement could turn into a massive deal for both sidesby Kirby Garlitos, on
In the midst of all the issues plaguing the company right now, the Volkswagen Group is still finding time to wheel and deal with new partners in an effort to further expand its business empire. The latest example of this comes as the German auto conglomerate has signed a memorandum of understanding with China’s Anhui Jianghuai Automobile, more commonly known as JAC in the auto industry, for a possible joint venture centered around developing electric vehicles for the Chinese market.
Specific details surrounding the partnership, including the investment size and business model of the possible joint venture, have yet to be revealed because no formal deals have been signed. The MOU, as it stands now, is also not legally binding until a final agreement is signed and approved by relevant bodies. According to Automotive News Europe, a formal agreement isn’t expected for another five months.
The German automaker did say in a press release that both parties intend to enter discussions on partnerships involving a variety of avenues, including research and development, manufacturing, sales, and zero-emission mobility services.
The two companies also plan to enter into a joint venture to develop, build, and sell electric vehicles in the Chinese market, a potentially lucrative arrangement for both Volkswagen and JAC given the growing popularity of electric vehicles in the market – sales of electric and plug-in hybrid models quadrupled in the country in 2015 and has no signs of slowing down – and the Chinese government openly embracing the models and pushing for consumers to buy them.
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High stakes involved if this partnership pushes through
It may not sound like a big deal now since no formal agreements have been signed, but rest assured, when Volkswagen and JAC dots those i’s and crosses those t’s, this partnership could change the landscape of the EV market in China.
For Volkswagen, this deal could solidify its presence in the Chinese market, arguably the most important auto market in the world now that it has surpassed the U.S. as the largest market for pure electric vehicles. Thank the Chinese government for that for all the incentives it’s giving in it continued attempt to cut down on the country’s pollution levels. Having a partner like JAC is a huge step in the right direction for Volkswagen’s goal of becoming the biggest automaker in China, not because the Chinese company is the ninth biggest automaker in the country, but because it’s one of the most aggressive car companies in pushing for electric vehicles in the country.
Make no mistake though, as much as Volkswagen stands to get from partnering with JAC, the latter is likely to get more out of the deal simply because of Volkswagen’s place in the hierarchy of automakers all over the world. Scandals notwithstanding, the German auto conglomerate is still the second largest automaker in the world, only sitting behind Toyota in that category. Having Volkswagen as a partner immediately allows JAC to tap into the auto giant’s vast resources in an effort to grow its own business and climb up the ranks among local automakers in China.
Granted, the full scope of details surrounding the partnership are still being discussed, but if this deal does push through in a mutually beneficial way for both Volkswagen and JAC, it has a chance of becoming one of the biggest auto partnerships the industry has seen in a long time.