China approves VW’s stake increase in joint venture with FAW image

According to German automaker Volkswagen AG, the second largest in the world and the biggest carmaker in Europe, Chinese authorities have given the OK to its bid to increase the stake owned in the local joint venture with state-owned automaker FAW.

Volkswagen, after exiting a serious leadership crisis that led to the ouster of its long running chairman Ferdinand Piech last month is focusing on addressing current issues, with China being the carmaker’s key market in the drive to overcome Japan’s Toyota as the No. 1 automaker in the world before the decade ends. “The Chinese government has approved in principle a possible increase in the stake,” commented a company spokesperson about the desire to increase the stake in the local joint venture. “This is a standard worldwide process for the transfer of shares which, along with the negotiations, will last for some time,” adding that both VW and FAW are now assessing the deal through internal working groups and have jointly tapped external consultants to value the stake.

The Volkswagen group sold a total of 3.7 million autos in China last year, up 12.4 percent from the previous year, through its joint ventures Shanghai Volkswagen and FAW-Volkswagen. The German company has 29 vehicle and component manufacturing facilities in the country and wants to increase its stake in the joint venture from 40 percent – most likely to the maximum limit allowed by the Chinese state (50 percent). Analysts at Evercore ISI believe the crucial joint venture has a total value of around 50 billion euros ($57 billion), meaning the stake jump would most likely cost VW around five billion euros.

Via Reuters