Volkswagen and Daimler further expand into Chinese AEV market 06-09-2017

Germany’s car manufacturer giants Volkswagen and Daimler have both recently made agreements with Chinese enterprises to strengthen their presence in China’s AEV market and boost production of green cars. These steps reflect the rush of foreign enterprises to increase zero-emission car sales in China, as the country is getting strict regarding environmental protection.



The biggest car manufacturer in the world, Germany’s Volkswagen, has received the approval by Chinese regulators to create a joint venture with Chinese Anhui Jianghuai Automobile Group. Hence, the both companies will work together to establish a project, which plans to build about 100,000 alternative energy vehicles (AEV) for VW.  


China is the biggest market for electric cars sales globally, with all the big car manufacturers are competing to get their share in this emerging market. Volkswagen has done a big step with the approval for joint venture, which strengthens the position of this already biggest foreign car manufacturer in China.  


The new joint venture will be the third kind for VW as the car manufacturer from Wolfsburg has already an established joint venture with China FAW Group and SAIC Motor. The German automaker was able to lead the world market in passenger car sales, especially with a large number of these vehicles built in China. As a fact, the Joint Ventures with the two Chinese car enterprises were able to build about 3 million cars in China in nine production plants 2016.  


This is what makes the approval very special. Normally, foreign car makers are only allowed to have maximum two partnerships with Chinese enterprises. However, the National Development and Reform Commission approved even the third joint venture for Volkswagen, giving a huge advantage for the company.  


When the last regulatory obstacles are done, the 50-50 joint venture can be implemented and is expected to begin production in 2018. Included in the agreement is the construction of a new factory and an additionally research and development center. According to the contract, the joint venture will last for 25 years.  


Besides the project of building 100,000 AEV, the two companies also want to work together in the development and production of components for alternative energy vehicles.  


Volkswagen recently has made bad news by needing to recall hundred thousand of its Golf and Sagitar brands in China due to a headlight fuse defect. This problem has endangered headlight failure, which caused the Chinese General Administration of Quality Supervision, Inspection and Quaratine to announce this measurement.  


China’s government is in favor for this agreement, since it means more cleaner and cheap cars for the heavily polluted Chinese country. Li Keqiang, China’s Premier, said recently in a meeting with German Chancellor Angela Merkel, that China is continuously providing German automobile firms a good environment to sell cars in China. China is working hard on aiming to reduce carbon emissions significantly by the year 2030.  




The biggest competitor in China’s AEV market, Tesla, has no partnership with any local domestic car enterprise in China yet. However, Elon Musk has recently visited Chinese Premier Minister Wang Yang, which may indicate the efforts of Tesla to get into a Joint Venture with Chinese car manufacturer in the near future.  


Daimler is also expanding investments and presence in China’s alternative energy market. The company has reached an agreement with Chinese BAIC to build their AEV in China domestically. As part of the agreement, Daimler will also investy in Beijing Benz Automotive to enhance the facilities, enabling them to produce AEVs in China.  


At present, the Beijing facility of Daimler only produces conventionally powered Mercedes models. However, it plans to set up a separate line in the factory for electric vehicles for Daimler which aims to launch over 10 new electric cars in China by 2022.


The rush of car makers to invest in China’s AEV market is also connected to the zero-emission vehicles mandate of the country, which requires the share of at least 8% of new car sales are zero-emission cars in 2018. The number will furthermore grow to 12% by 2020. Recent efforts of the car lobby was able to convince China to postpone the mandate for one year, but still car manufacturers have a hard time to reach this number in the near future.  


CCM believes this cooperation is of great significance to the development of both Chinese and German automobile industries. The Chinese government’s approval of Volkswagen and Mercedes-Benz to respectively establish their third joint venture in China in the AEV industry demonstrates its increasing emphasis and recognition on the development of domestic leading AEV brands.  


About CCM

CCM is the leading market intelligence provider for China’s agriculture, chemicals, food & ingredients and life science markets.  


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