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November 20, 2015

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VW delays raising stake in JV for 2-3 years

VOLKSWAGEN will not raise its stake in its FAW joint venture for two to three years due to financial reasons, Jochem Heizmann, president and CEO of Volkswagen China, said yesterday.

The postponed stake increase, which has been approved by the Chinese government in principle but its details were kept secret, is expected to cost Volkswagen 5 billion euros (US$5.4 billion) if the German carmaker raises its stake in FAW-Volkswagen from 40 percent to 50 percent, the upper limit for a foreign joint venture carmaking partner in China.

Heizmann revealed the stake postponement when he commented on the local implication of Volkswagen’s emission cheating scandal, which broke out in the US in September and brought the group its first quarterly loss in 15 years when it incurred a net loss of 1.67 billion euros in the third quarter.

In light of the scandal, Volkswagen has set aside 6.7 billion euros to cover the costs arising from the scandal, which forced it to recall 11 million affected cars worldwide. But market watchers said the amount set aside is for regulatory fines and lawsuits are highly likely to follow. The company could face eventually a bill as high as 35 billion euros.

Heizmann said China is generally not affected by the illegal software that Volkswagen used on its diesel cars to cheat emission tests in the US as China imports a very small number of them.

At a media workshop in Guangzhou yesterday, Volkswagen said it will introduce 15 locally produced new-energy cars in the next five years to help China reduce its carbon footprint. The new models also help consume less fuel, which is set to go below 5 liters per 100 kilometers on average by 2020 under the Chinese government’s target.


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