Volkswagen extends China joint venture by 25 years to tighten market grip

Volkswagen extended its joint venture with China FAW Group Corp by 25 years, as the German manufacturer steps up its bid for the global autos throne by targeting an increasing share of the world's biggest car market.

European and US carmakers are keen to raise their presence in China, but have been confined to owning 50 percent or less of joint venture companies run together with Chinese enterprises.

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Although Chinese demand is slowing somewhat, car sales in the world's No 2 economy have still been up over 10 percent this year, helping global players such as VW cope with a fragile recovery in its European home market after a six-year slump.

VW, one of the first global automakers to establish production facilities in China during the 1980s, has the biggest manufacturing output and has been working with FAW for over two decades.

By extending the joint venture from 2016 to 2041, VW and FAW will expand their R&D activities and step up work on fuel-saving technology, VW said.

"Enhancing ties with its Chinese partners is a must for VW, which is overly dependent on the market," Frankfurt-based Bankhaus Metzler analyst Juergen Pieper said.

Wolfsburg-based VW, which also has a joint venture with China's SAIC Motor Corp Ltd, last year sold almost 3.3 million cars in China, its biggest market, about a third of its record global deliveries of 9.73 million.

The German behemoth, whose 12 brands include ultra-luxury marque Bentley and heavy-trucks manufacturer Scania, has enjoyed a period of sustained growth, boosted by emerging market buyers. It is set to hit a 10-million sales target in 2014 - four years early - underscoring its bid to eclipse global sales champion Toyota.

Nine-month group deliveries in China, including the Audi luxury brand and sports-car maker Porsche, jumped 15 percent to 2.72 million autos, VW said on Friday in a separate statement.

Investment plans

The contract extension with FAW was signed on Friday on the occasion of talks between German Chancellor Angela Merkel and Chinese Premier Li Keqiang in Berlin.