Volkswagen plans to invest €2.4bn in a joint venture with one of China’s leading designers of artificial intelligence chips, as the carmaker bets on AI-assisted and driverless cars as a way to retain share in its biggest market.
The German carmaker, which earns roughly half of its net profits in China, said on Thursday that it had agreed to partner with Horizon Robotics “to accelerate the development of automated driving [and] drive the repositioning of our China business”.
VW’s software company Cariad will take a 60 per cent stake in the joint venture with Horizon. The transaction is expected to complete in the first half of 2023, pending regulatory approval.
The tie-up comes at a moment of rising tension between Beijing and the west, with the Biden administration announcing last week that it would step up restrictions on exporting semiconductors made with US technology to China.
VW has also faced pressure from unions and shareholders over its plant in Xinjiang province, where China has been accused of human rights abuses against the Uyghur minority.
The company has always said it has seen no evidence of problems at its factory, where it has produced cars for the Chinese market since 2013 with local partner, SAIC.
By partnering with Horizon, one of China’s most successful chipmakers, VW is trying to retain access to cutting-edge chips in China, said Tue Le, managing director of Sino Auto Insights, a Beijing-based consultancy.
“It looks like a defensive play. But also likely to curry favour with the Chinese government,” he added.
It is one of the first big announcements since Oliver Blume took charge as VW chief executive just over a month ago.
Blume, who is also head of VW brand Porsche, took over after his predecessor Herbert Diess was ousted, partly because of criticism over VW’s software development programme and recent poor performance in China.
Ralf Brandstätter, head of VW’s Chinese business, called the partnership “a central cornerstone of our strategy to realign and further strengthen our activities in our most important market worldwide”.
Horizon is run by Kai Yu, previously the founder and head of the deep learning programme at Baidu, China’s version of Google.
The company, which Kai co-founded in 2015, has its headquarters in Beijing and has offices in Silicon Valley, Shanghai and Shenzhen. Over seven years it has raised a total of $2.2bn in 12 funding rounds, according to Crunchbase.
Its key investors include chipmakers Intel and SK Group, private equity and venture capital groups including Hillhouse Capital, Sequoia and 5Y Capital, carmakers including Tesla rival BYD, and CATL, the world’s biggest electric vehicle battery maker.
