On June 3, Volkswagon Group (VW) signed a deal with China’s SAIC Motor Corporation Ltd to boost research, development, and production of electric and hybrid vehicles in China. The deal is a part of Volkswagen’s larger commitment to invest $29 billion dollars into China, its largest market, by 2019.
VW and SAIC’s joint venture is known as Shanghai Volkswagon VW, and was established in 1984. Under its newest deal, SVW has agreed to expand its plant in Shanghai and begin developing VW’s new C-segment model there starting in 2016. A new electric model of VW’s Lavida will also begin production there within four years. The joint venture will intensify research into fuel cells and plug-in hybrid vehicles.
Over the next four years, VW plans to localize more than 15 different electric vehicle models in China, in keeping with VW’s global strategy to invest in technology and manufacturing close to its B2B customers in order to ensure volume growth. With 29 vehicle and component production locations in China, VW has become China’s top foreign automaker.
For years now the Chinese government has encouraged citizens to switch to electric vehicles, especially those in heavily polluted cities. While it promotes the domestic models in particular, incentives like tax exemptions and reductions in license plate fees apply to foreign brands as well, and Chinese who have the means to afford them generally prefer the foreign vehicles.