Volkswagen and JAC are currently planning to strengthen their relations for development of products in the Chinese market. It seems as if this relationship is sparking tensions with SAIC and FAW who are also affiliated with JAC. Currently, Volkswagen has a 50-50 venture with SAIC, and holds 40 per cent of its venture with FAW.
Based on a report detailed by Reuters unnamed insiders revealed that SAIC and FAW feel as if they can be sidelined if the deal between Volkswagen and JAC goes forward. In 2020, the German manufacturer purchased a 75 per cent stake in the Chinese company after Beijing relaxed rules that had previously banned international brands from owning majority stakes in local automotive companies.
The brand took control of JAC’s Hefei plant last year and is now planning to purchase another as part of its global expansion of electric vehicles. This decision seems to have had a negative impact on SAIC and FAW as commitment to more models for their brands may falter.
Since it began operations in China, the German manufacturer has become the most successful foreign manufacturer in the region with a total of 3,85 million sales confirmed last year despite the region being heavily affected by the COVID-19 pandemic.
“It’s fair to say that without Volkswagen, the Chinese auto industry wouldn’t exist as we know it today and vice versa,” Bernstein analysts said in a recent a research note.
“No global OEM is bigger in China and has leveraged the benefits more than Volkswagen. China was the source of about 50 per cent of Volkswagen earnings and cash flows.”
SAIC and FAW are now seeking assurances their businesses won’t suffer as the German manufacturer looks to step up investment in the Hefei plant, five of the sources told the publication.
“We laid good ground for Volkswagen in China so it cannot abandon us in the future,” one senior FAW source said.
Tensions between the partners are not new. Company CEO Herbert Diess riled SAIC in 2019 when he told the media he planned to increase stakes in Chinese ventures.