The move is part of Volkswagen’s long term strategy for AI-assisted and driverless cars in China, its biggest market.

Volkswagen AG (ETR: VOW3) announced an investment of €2.4bn in a joint venture between its software company CARIAD and Horizon Robotics, a leading Chinese designer of AI chips and provider of computing solutions for smart vehicles in China. CARIAD will be a majority (60%) shareholder in the JV, expected to be formed in the first half of 2023. (Volkswagen AG)

The Financial Times attributed the transaction to Volkswagen’s desire to retain access to cutting-edge chips in China, given rising tension between Beijing and the west, with the Biden administration announcing last week that it would step up restrictions on exporting semiconductors made with US technology to China.

However, Volkswagen said in its statement that it was strengthening its development competence “in China, for China” as an important market. The company earns about half its profits from China. VW also laid an emphasis on chips and automated driving.

“Integration of numerous functions in one integrated chip is intended to increase stability and reduce energy consumption of entire automated systems, allowing for scalable ADAS and AD solutions with differentiating innovation,” VW said.

“Teaming up with Horizon Robotics will allow Volkswagen to accelerate the development of automated driving as part of our NEW AUTO strategy and drive the repositioning of our China business,” said Volkswagen Management Board Member Ralf Brandstätter.

Horizon Robotics CEO Dr. Kai Yu said: “As one of the leading companies to commercialize and mass produce computing solutions of autonomous driving in China, we will bring in our expertise to our partnership with CARIAD to develop next-generation technologies for smart vehicle users.”

Investors in Horizon include Intel, SK Group, Hillhouse Capital, Sequoia, 5Y Capital, BYD, and CATL.

Horizon has so far raised $2.2 billion.

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