Exclusive: VW's talks to raise stake in its Chinese joint venture stall

Tue Nov 11, 2014 11:38am EST
 
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By Andreas Cremer

BERLIN (Reuters) - Volkswagen's (VOWG_p.DE: Quote) bid to increase its stake in a lucrative joint venture with Chinese partner FAW SASACJ.UL has stalled just as the German automaker is stepping up expansion in its biggest market, company sources said.

The setback to VW's ambitions in China, where it sells nearly 40 percent of its vehicles, comes as Beijing seeks to promote national champions that can compete globally and appears to be putting overseas companies under increasing scrutiny.

VW's efforts to raise its 40-percent holding in FAW-Volkswagen Automotive Ltd. to about 50 percent have stalled after more than a year of talks, two sources at the German company told Reuters on condition of anonymity due to the confidential nature of the matter.

"The door (leading to a higher stake) appears to be closed at the moment," one of the sources said. VW's efforts to increase its stake would continue, they said.

VW holds a 50-percent stake in its second Chinese joint venture, with SAIC Motor Corp Ltd (600104.SS: Quote). Expanding its holding in the project with FAW would earn it a greater share of both ventures' growing profits which have more than doubled since 2010 to 4.3 billion euros ($5.34 billion) in 2013.

VW and the FAW-VW joint venture company declined to comment. FAW could not immediately be reached for comment.

There is anecdotal evidence from a variety of companies operating in China that demands from local partners, policymakers, and regulators are getting more rigorous.

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A man holds an umbrella as he walks past a company logo of FAW-Volkswagen at an automobile exhibition in Fuyang, Anhui province, September 12, 2014.  REUTERS/Stringer