Volkswagen said to deepen research cooperation with China’s FAW

Volkswagen said to deepen research cooperation with China's FAW

Volkswagen Group will deepen research-and-development projects with its Chinese joint venture partner China FAW Car Corp. (FAW car above sold in Russia) including work on hybrid and electric cars, according to five people familiar with the matter.

The German automaker will also extend an agreement centered around vehicle production by 25 years, said the people, who asked not to be identified before a public announcement.

Volkswagen will also explore additional ventures with its Chinese partner, the people said.

VW operates a second joint venture in China with SAIC Motor Corp.

Robust growth in China has helped VW offset shrinking demand in other emerging countries and a sluggish recovery of the European car market from a 20-year low. China is vital to VW’s goal of overtaking Toyota to become the world’s No. 1 automaker by 2018. The country is VW’s largest sales region and a key earnings contributor, accounting for about a third of the group’s global sales volume.

The two joint ventures contributed €2.62 billion ($3.3 billion) to VW’s first-half net income, up from €2.37 billion last year. VW also received €2.8 billion in dividends from the two ventures last year.

VW established the joint venture with SAIC to produce the Santana model in 1985, making it one of the first foreign automakers to enter the Chinese market. The FAW joint venture was forged 1991 in Changchun for license production of the Audi 100 sedan. The current pact with FAW will expire in 2016.