(Yicai Global) May 29 -- Volkswagen China Investment will pay EUR1 billion (USD1.11 billion) to take over as the largest shareholder in Chinese battery maker Guoxuan High-Tech with a 26 percent stake, and thereby become the first international automaker to invest directly in a Chinese battery maker, VW said in a statement today.

The deal will wrap up by the end of the year, the auto giant said, with the caveat that the transaction must first pass regulatory muster.

VW is pulling out the stops to hit its target of 1.5 million in annual new energy vehicle sales in China by 2025, including plug-in HEVs.

“Together with strong and reliable partners, Volkswagen is strengthening its electrification strategy in China,” said Dr. Herbert Diess, chief executive of Wolfsburg, Germany-based Volkswagen, adding, “The electric cars segment is growing rapidly and offers a great deal of potential for JAC Volkswagen. We are actively driving forward the development of battery cells in China through our strategic investment Gotion.”

Guoxuan’s announcement of the deal yesterday sent its shares [SHE:002074] to the daily 10 percent price limit at opening to stop trading at CNY29.90 (USD4.18).

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Guoxuan is based in Hefei, the capital of China’s eastern Anhui province and is also known as Gotion, particularly in the US where it also has a presence.

The German auto behemoth’s thrust of its weight behind the bronze medalist in the China race threatens to upset the primacy of front runner Fujian-province-based Contemporary Amperex Technology and the position of Shenzhen-headquartered runner-up BYD, which also makes electric cars and face masks, both of whom edged out Guoxuan in installed capacity last year.

The proceeds of the sale will go towards Guoxuan’s high specific energy power lithium battery industrialization project with an annual capacity of 16 gigawatt hours and high nickel ternary anode material project with a yearly output of 30,000 tons and to top up its working capital, per its statement.

Guoxuan’s power batteries are widely used in battery electric commercial, passenger and logistics vehicles and hybrid electric vehicles, energy storage power stations, telecommunications base stations, wind-solar hybrid power installations and portable power sources.

The partnership will hone its competitiveness in the new energy battery field and help it grow, Guoxuan said.

Editor: Ben Armour