According to people that have knowledge of the company’s strategy, Volkswagen’s negotiations to raise its stake in the very lucrative joint venture with Chinese partner FAW have been stalled.
The German automaker – hit by uncertainties in many global markets (both Americas, Central and Eastern Europe, Russia) – has increased it focus on its largest single market – China – also the world’s biggest auto market. VW’s ambitious plans seem to have been setback just as the Beijing government is increasing its scrutiny over overseas companies and acts bullish to promote local business “champions”.
Foreign companies in China need to have joint-ventures with local businesses and are not allowed to secure more than 50% of the shares. Now, Volkswagen’s JV had some room to negotiate, as the German automaker only holds around 40% in the FAW-Volkswagen Automotive holding. According to the sources, the bid to raise ownership to around 50% have reached a deadlock after more than a year of talks – said two people from the automaker. Volkswagen already holds 50% of its second Chinese joint venture, with SAIC Motor and expanding its stake in the FAW JV is crucial for securing higher revenue. Both ventures’ rising earnings have soared since 2010 to 4.3 billion euros last year.