Volkswagen invests 2.4 billion US dollars in automation and pursues joint venture in China

Volkswagen (VWAGY) plans to expand its push into the electric vehicle market with a $2.4 billion investment, the German automaker said on Thursday.

The company is also pursuing a joint venture with Chinese company Horizon Robotics, a major chipmaker in the world’s largest economy. However, the deal is still subject to regulatory approval.

Upon completion of the transaction, software company CARIAD, a subsidiary of the automaker, will hold a controlling 60% stake in the joint venture.

The partnership is an attempt to “accelerate the adoption of automated driving solutions for the Chinese market,” the company said in a statement.

Previously, China had rules blocking foreign companies that held controlling stakes in domestic auto companies. The regulations were abolished in 2020.

“The cooperation with Horizon Robotics will enable Volkswagen to accelerate the development of automated driving as part of our NEW AUTO strategy and to advance the repositioning of our China business,” said Ralf Brandstätter, Member of the Board of Management of Volkswagen.

The move comes as the auto industry has been hit by a global semiconductor shortage. Amid supply uncertainties, some automakers, including Korea-based Hyundai (HYMTF) and Detroit-based Ford (F), have made investments to bring chip production in-house.

For the German automobile manufacturer, the joint venture represents an opportunity “to create long-term value for the Group and our shareholders in line with the expected market development in China”.

Earlier this year, the company reported a 27% increase in EV sales with 217,000 vehicles sold.

Shares of Volkswagen closed at $16.03 on Thursday, up $0.55, or 3.55%. Volkswagen invests 2.4 billion US dollars in automation and pursues joint venture in China

Fry Electronics Team

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