VW bags bigger JV share

Chinese Premier Li Keqiang brought a present for German carmaker Volkswagen Group (VW) during his visit to Germany - VW's long-expected share increase in its joint venture established with China FAW Group Corp.

Experts believe that FAW made a sacrifice for strengthening economic cooperation between the two countries, but there is still a chance for the company to bargain for compensation in the share ratio change process.

More opening up

On October 8, one day before Li's arrival in Berlin, German newspaper Die Welt published Li's signed article titled "Let opening up and innovation lead cooperation between China and Germany." [Special coverage]

The article said that with an eye on the future, the two countries should explore the potential for bilateral opening up, official news portal people.com.cn reported on October 10.

"China will favorably consider VW's request for increasing its stake in joint venture FAW-VW Automotive Co, and China also expects that Germany will allow qualified Chinese enterprises to bid for high-speed railway projects in Germany," Li said.

FAW and VW currently have 60 percent and 40 percent stakes of their joint venture FAW-VW respectively, and stakes held by the German auto group will increase to 49 percent, media reports said Monday.

"FAW and VW agree in principle to adjust share ratio according to Chinese law and regulation, but currently there are no more available details," FAW-VW told the Global Times via e-mail on Tuesday.

"I was kind of surprised to learn Li mentioned specific enterprises in his article, because usually the Premier only talks about macro strategies," Wu Shuocheng, an auto industry consultant at Shanghai-based Menutor Consulting, told the Global Times on Tuesday.

Allowing VW to have a bigger stake in the joint venture is more akin to a market exchange strategy: China's auto market for the German high-speed rail market, Wu noted.

Li has been nicknamed by Chinese Internet citizens as "China's top high-speed railway salesman" as he has been deploying "high-speed railway diplomacy" through the promotion of China's high-speed railway technology in almost all of his overseas trips since he took office.

In addition to seeking German market access for domestic high-speed railway technology, China also needs to show it is open to foreign capital, a Beijing-based independent auto industry analyst Zhang Zhiyong told the Global Times on Tuesday.

China hopes for an open and favorable environment for its outbound investment, so it has to make some move as an exchange, according to Zhang.

FAW's concession

The joint venture was founded in 1991 jointly by FAW, VW and VW's subsidiary Audi AG, with a stake ratio of 60:30:10, newspaper Beijing Business Today reported on Monday.

Although Audi only has a small share in the joint venture, official data showed that it contributed to half of the joint venture's profit in 2013. As a result, Audi has made requests several times for a higher stake in FAW-VW, the report said.