VW Will Work With China

VW Will Work With China

Volkswagen will deepen research and development projects with its Chinese joint venture partner China FAW, including work on hybrid and electric cars, according to five people familiar with the matter.

Europe’s largest automaker will also extend an agreement centered around vehicle production by 25 years, said the people, who asked not to be identified before a public announcement. The Wolfsburg, Germany-based automaker will also explore additional ventures with its Chinese partner, the people said. VW officials declined to comment. A call to the office of FAW spokesman Wu Shaoming wasn’t answered.

VW operates a second joint venture in the world’s largest auto market with SAIC Motor Corp. Robust growth in China has helped VW offset shrinking demand in other emerging countries and a sluggish recovery of the European car market from a 20-year low.

China is vital to VW’s goal of overtaking Toyota to become the world’s No. 1 automaker by 2018. The country is VW’s largest sales region and a key earnings contributor, accounting for about a third of the group’s global sales volume.

The two joint ventures contributed 2.62 billion euros to VW’s first-half net income, up from 2.37 billion euros last year. VW also received 2.8 billion euros in dividends from the two ventures last year.

VW established the joint venture with SAIC to produce the Santana model in 1985, making it one of the first foreign automakers to enter the Chinese market. The FAW joint venture was forged 1991 in Changchun for license production of the Audi 100 sedan. The current pact with FAW will expire in 2016.