Volkswagen to buy massive stake in China partner JAC, consults Goldman Sachs

04/16/2019

Posted by: Oluwaseun Adeniji

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Volkswagen is set to acquire a big stake in the Chinese EV joint partner and automotive giant, JAC with the technical advice of Goldman Sachs. Check here for more!

In a recent report by the Reuters, we learnt that Volkswagen AG is taking necessary steps in buying a big stake in its Chinese EV joint venture partner JAC motors and has decided to make use of Goldman Sachs as company’s adviser on the big plan. This report was gathered from the inside people, who are directly involved in the matter.

This move by the biggest external automaker in China, Volkswagen, to purchase into Anhui Jianghuai Automobile Group (JAC Motors) is the most recent move by foreign car manufacturer to enhance ownership  in the biggest automotive market in the world since rules were softened by Beijing in previous year.

BMW, a rival automaker from Germany has also accepted last October to acquire control of the major partnership venture in China for 3.6 billion euros or equivalent of 4.06 billion dollars. However, the Daimler AG is planning to increase its stake in the BAIG Motors, its local partner.

This purchase of stake by implication put JAC as a key player in Volkswagen’s remarkable global attempt on electric vehicles and the need to meet the growing demands of the Chinese for such vehicles. VW has also revealed its plan to relocate substantial part of proposed EV production in China to JAC, if the deal falls through.

>>> Reviews and prices in Nigeria of Volkswagen products:

image-of-JAC

The giant German automaker, VW is all set for Anhui Jianghuai Automobile Group (JAC Motors)

The country formally frowned at foreign companies coming into China to control any of its automakers or even a partnership. This rule was removed last year in Beijing most especially for companies that are into manufacturing plug-in hybrid and pure electric vehicles. It is noteworthy that such commercial production ban would ease in 2020 and by the time we get to year 2022, it will get to the wider market.

Recently, Li Kequiang, who happens to be the Chinese premier has assured the European Union (EU) that Beijing would refrain from compelling foreign companies from revealing their sensitive know-how or any confidential information when plying their trade in their country; he said China was fully prepared to discuss new global rules for trading on industrial subsidies.

VW reportedly has almost $85b as its market capital and does not currently own any shares in JAC, a Shanghai listed company with a market value according to Refinitiv data of $1.9 billion.

According to the inside information, VW plans are still at the early stage but the company is determined to acquire a big stake. This means it will seek to purchase the shares from the major shareholders at JAC. This, according to the data from Refinitiv, is majorly firms that are backed by the state and owning more than 40%. 24% of these shares are owned by the JAC’ parent, Anhui Jianghuai Automobile Group Holding and is fully under the local government control.

JAC-Motors

JAC & VW are discussing the joint venture co-operation

In a recent contact by the Reuters, VW said:

 We are carefully watching what the implications are for our business and for our joint venture partners. In this regard we will explore all possible options together with all stakeholders to secure long-term success in China.”

JAC also corroborated this report by claiming it has been in contact with VW on discussing deepening joint venture cooperation on new energy vehicles. According to them, no formal plan has been established yet. This comment was refuted by Goldman, who said the concerned people are claiming anonymity because of the level of confidentiality.

The shares of JAC rose on Thursday by 10% maximum limit, after a previous similar rise on Wednesday. But according to report, the VW shares finished slightly lower on that Wednesday.

Chinese mini EV - JAC ieV6 - Chinese Electric Car - CHINA DRIVER

According to a Hong Kong based analyst at Jefferies, Patrick Yuan said:

The news shows the bargaining power of companies like JAC and BAIC is stronger, and Volkswagen’s and Daimler’s determination to cooperate with Chinese partners in the long-term is also firm,

This JAC is the 11th largest local auto manufacturer in China by group sales, and they are into production of commercial vehicles such as pickup truck, and heavy trucks. The company is also known to manufacture cars for EV automaker NIO Inc.

>>> To see more up-to-date News and reports like this, navigate to our car news, auto-launch, and automotive industry updates.

Oluwaseun Adeniji
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Oluwaseun Adeniji

Oluwaseun Adeniji

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Oluwaseun Adeniji is a passionate writer and a poet with special interest in writing about cars. He is a master degree holder in international conflict and management. He enjoys feeding the public with the latest auto gist and well researched car reviews. He is also a strong football lover. So, if Oluwaseun is not writing, expect him to be reading about sports.

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