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Expected yet unexpected: JAC-Volkswagen tries to explore new JV model with MFV tie-up

Volkswagen Group’s signing of an MOU with JAC on November 27 to explore the possibility of setting up a joint venture for the development and sales of multi-functional vehicles (including but not limited to pickups, MPVs and electric commercial vehicles) less than half a year after the two had officially established their battery electric vehicle joint venture was both expected yet unexpected.

It was expected in the sense that both JAC and Volkswagen Group are manufacturers of a comprehensive range of vehicles, including passenger vehicles, light trucks, pickups, heavy-duty trucks and buses. The new proposed JV on MFVs would be a natural extension of the battery electric JV and obviously reflects Volkswagen’s intent to be present in every segment of its largest global market. It also follows GM’s and Ford’s moves over the previous year to bring their imported Silverado, Colorado and F150 Raptor officially into the Chinese market, and Renault’s move in July to form a joint venture with Brilliance China to produce light commercial vehicles. Volkswagen already sells the imported Multivan in China, which has become quite a popular model in the imported high-end van/MPV segment.

Furthermore, on September 6, 2016, a day before JAC and Volkswagen signed the MOU for the battery EV joint venture, Volkswagen Truck & Bus entered into a strategic alliance with U.S. truck and bus manufacturer Navistar where the former would acquire a 16.6 percent stake of the latter. It just so happens that JAC already has a JV with Navistar producing diesel engines and Volkswagen’s stake in Navistar means that the German automaker already has an indirect stake in the JAC-Navistar JV.

Coincidence or not, Volkswagen, and other foreign automakers for that matter, are increasingly becoming active in China’s light commercial vehicle market, which has a scale of about 3 million units annually.

What was unexpected, however, was that the proposed JV is intended to be purely an R&D and sales JV that does not involve production. The two partners said in a joint statement that the MOU was signed to “explore potential joint venture models.” It likely could follow Denza’s model, where BYD and Daimler formed only a technology JV with production “outsourced” to BYD. Products developed by the MFV JV could also be contract manufactured at JAC’s existing manufacturing plants.

If all goes smoothly, which CBU/CAR believes would just be a matter of going through formalities under the existing industry policies, Volkswagen would become the first foreign automaker to have four vehicle JVs in China and the only to have two with the same partner.

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