Volkswagen knows it needs to shift towards EVs. That was the company's big message at the Paris Motor Show this year, and the same thing is happening in China. VW will work with Jianghuai Automobile (JAC) to develop an electric vehicle to take advantage of both rising vehicle sales in China and the impact of the country's stricter greenhouse-gas emissions mandate. Speaking at the Paris Motor Show, Volkswagen China head Jochem Heizmann said the EV will be of the low-cost variety and will be marketed under a new brand name.

VW signed a memorandum of understanding to work with JAC on a vehicle-making joint-venture last month, and is likely to sign an official agreement by the end of the year. VW also has joint-venture agreements with SAIC Motor Corp. and China FAW Group, with plans to produce a separate EV with them as soon as 2020, but the JAC agreement may allow VW to have EVs on China's roads before then.

Volkswagen continues to try and distance itself from diesel powertrains as it deals with the emissions scandal that broke last year. Meanwhile, China's mandate is for automakers to boost fleetwide fuel economy by almost 40 percent between 2015 and 2020 to about 47 miles per gallon. To that end, VW and its partners will compete against China-based companies such as BYD and Kandi for electric-vehicle sales. Additionally, China may introduce laws similar to California that require automakers that sell more than 50,000 vehicles a year to make electric vehicles within the country.

VW also wants to boost sales of conventional vehicles in China. The company unveiled a China-only version of its Phaeton sedan – called the Phideon – at the Geneva Motor Show earlier this year. Volkswagen confirmed at the time that the model won't be available in the US.

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