Volkswagen Announces €2.4B Joint Venture With Chinese AI Chip Expert

Volkswagen is betting on AI-assisted and autonomous cars to keep its foothold in its largest market, and the company plans to invest €2.4bn in a joint venture with one of China’s premier designers of artificial intelligence processors.

The German automaker says it would work with Horizon Robotics “to speed the development of driverless cars [and] drive the repositioning of our China business” on Thursday. The company makes nearly half of its net profits in China.

Cariad, VW’s software subsidiary, will have a 60% ownership stake in the new firm. In the first half of 2023, assuming regulatory approval, the deal should close.

At a time when tensions are high between Beijing and the West, the two parties have decided to join forces just as the Biden administration announced last week that it would increase restrictions on exports of semiconductors built with US technology to China.

Unions and shareholders have also put pressure on VW over its Xinjiang facility because of China’s alleged human rights abuses against the Uyghur minority.

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Since 2013 with local partner SAIC, the firm has been producing automobiles for the Chinese market. The corporation has always maintained that it has found no evidence of difficulties at the factory.

Tue Le, managing director of Beijing-based consultancy Sino Auto Insights, remarked that VW was making an effort to maintain its supply of cutting-edge processors in China through a partnership with Horizon, one of China’s most successful chipmakers. I think this is a defensive play. Also, I expect this will win me some points with the Chinese leadership,” he continued.

When Oliver Blume took over as CEO of VW a little over a month ago, this was one of the first major announcements he made. Blume, who is also the president of Volkswagen’s Porsche division, replaced Herbert Diess, who was forced out in part due to criticism of Volkswagen’s software development plan and recent poor performance in China.

This relationship is “a crucial cornerstone of our strategy to realign and further develop our activities in the most important market in the world,” as stated by Ralf Brandstätter, the head of VW’s Chinese division.

Volkswagen Joint Venture With Chinese AI Chip Expert
Volkswagen Joint Venture With Chinese AI Chip Expert

Kai Yu, the founder and former head of the deep learning program at Baidu (China’s Google), now leads the Horizon team.

Kai co-founded the company in 2015, and it now operates out of Beijing in addition to the aforementioned locations as well as Silicon Valley, Shanghai, and Shenzhen. According to Crunchbase, over the course of seven years, the company has raised a total of $2.2 billion over 12 fundraising rounds.

Chipmakers Intel and SK Group, private equity and venture capital firms Hillhouse Capital, Sequoia and 5Y Capital, automakers including Tesla competitor BYD, and CATL, the world’s largest electric vehicle battery maker, are among its major backers.

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