Volkswagen is accelerating the pace to automate its electric vehicles for Chinese customers. CARIAD, a wholly owned auto software company of the German auto giant, plans to set up a joint venture with Horizon Robotics, one of China’s most serious auto chip developers, the company said on Thursday.
The German automaker plans to commit approximately €2.4 billion for its partnership with Horizon Robotics, a transaction expected to close in 2023 and subject to regulatory approval. Following the deal, CARIAD will have a 60% majority stake in the JV. It was only in 2020 that China relaxed rules that had previously banned foreign companies from owning majority stakes in local auto companies.
The merger comes at a time of global chip shortages and rising semiconductor costs. A handful of automakers are already moving some of their chip production in-house to mitigate supply chain uncertainties. China’s electric vehicle start-ups Xpeng and Nio have both assembled sizable teams to develop car-grade chips, according to Chinese tech business publication Leave message.
The deal came just weeks after Horizon announced it had received a strategic investment from Chinese state-owned company Chery Automobile.
Together with Horizon Robotics, Volkswagen will work on full-stack advanced driver assistance systems and autonomous driving solutions for the Chinese market. The goal is to “promote the integration of numerous functions on a single chip, increase system stability, save costs and reduce energy consumption.”
The vision is reminiscent of Nvidia’s recently announced next-generation automotive-grade chip designed to unite autonomous driving and in-car technologies. It’s interesting to see Volkswagen build close ties with a Chinese startup, while Nvidia’s state-of-the-art car chip is widely recognized as the most advanced in the industry. Given the escalation of US chip limits for China, it should come as no surprise that supply chain diversification is on the minds of VW executives. The question is whether Horizon can deliver anything comparable to its US counterpart.
Either way, having a local partner will likely help VW create more tailored solutions for the world’s largest car market. As Ralf Brandstätter, Member of the Board of Directors of Volkswagen AG for China, noted in a statement:
“Localized technological development gives the region more autonomy to further expand its position in the dynamic automotive market. Advanced technology encompassing the full software and hardware stack that the new joint venture will develop will enable us to tailor our products and services to the needs of our Chinese customers even faster and more consistently. By partnering with Horizon Robotics, Volkswagen can accelerate the development of automated driving solutions as part of our NEW AUTO strategy and drive the repositioning of our Chinese operations.”