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The Didi Chuxing application is displayed on a smartphone screen in this arranged photograph taken in Shanghai, China, on Sunday, May 22, 2016.  Photograph by Qilai Shen—Bloomberg/Getty Images

VW and Didi Chuxing Planning a High-End Car Hailing Service in China

Nov 17, 2016

Volkswagen said on Thursday it is in talks with China's Didi Chuxing to set up a high-end ride-hailing service, while also announcing ambitious sales goals for electric and hybrid vehicles in the world's biggest auto market.

The moves underscore how VW (vlkay), which vies with General Motors (gm) for the title of the biggest-selling automaker in China, is keen to double down its largest market, banking on long-term growth in a country where many people still do not own a car.

VW did not elaborate further on its plans with Didi, which would be the latest in a rush of tie-ups between automakers and technology firms seeking to profit from new ride services.

Didi Chuxing is China's largest ride-hailing company, with 300 million users across more than 400 cities. It cemented its dominance in the domestic market this year when it bought Uber's operations in the country.

Globally, automakers like VW are developing electric vehicles and billing themselves as "mobility" companies that don't merely sell cars but also offer alternatives to car ownership such as ride-hailing.

In similar moves, General Motors has invested in ride-hailing service Lyft and Toyota Motor (tm) has a partnership with Uber Technologies.

VW also plans to be one of biggest players in so-called 'new energy vehicles' (NEV) in China, saying it was targeting annual sales of 400,000 by 2020 and 1.5 million by 2025 as Beijing pushes automakers to sell low-emissions cars via incentives and friendly regulations.

"We have to do more in the NEV area. The government is pushing, the general environment in China is pushing that," Jochem Heizmann, chief of VW's China's operations told reporters ahead of the Guangzhou auto show, which opens on Friday.

Volkswagen will deliver its first locally produced NEVs under its Audi brand this year. Audi AG manufactures the vehicles in a joint venture with China FAW Group.

In addition, it has a joint venture with SAIC Motor, and the companies have plans to sell plug-in hybrid cars in China, while it is also exploring making electric vehicles in a venture with Anhui Jianghuai Automobile (JAC Motor).

Heizmann said he was hopeful the government would allow Volkswagen to have three joint ventures in China.

"Normally the legal framework is you are only allowed to have two joint ventures. There is a special chance to have this additional joint venture just on pure battery cars," Heizmann said.

Overall sales of NEVs in China more than quadrupled last year to 331,000 units with rapid growth continuing in 2016.

This story has been updated.

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