Volkswagen's Jetta brand is in talks to partner with Leapmotor, with FAW-Volkswagen likely to buy out one of Leapmotor's platform technologies, according to local media.

(Image credit: CnEVPost)

After Volkswagen's partnership with Xpeng (NYSE: XPEV) and Audi's with SAIC, another brand of the German auto giant is reportedly set to enter into a similar tie-up in China.

Volkswagen's Jetta brand is in talks with Leapmotor, and unlike the Volkswagen- deal, Volkswagen's Chinese joint venture FAW-Volkswagen is likely to buy out one of Leapmotor's platform technologies, local media outlet Cailian reported today.

FAW has already issued an internal document saying that if the deal is finalized, the Jetta brand will primarily target the budget EV market and will move its marketing company to Hangzhou, as FAW-Audi has done, the report said, citing people familiar with the matter.

A number of Leapmotor's models are in the same price range as Jetta models, including the Jetta VS5 and VS7, and there is plenty of room for the two to work together, according to the report.

The next three years is a key window period for the development of automotive intelligence, German cars have an advantage in hardware, but lag behind in software, and if they want to remain competitive, intelligent systems are essential, the report said, citing an unnamed industry source.

Volkswagen lacks the technological reserve in this field and can only turn to Chinese car companies, the source said.

If the cooperation with Leapmotor is reached, Volkswagen will fully rely on the technological strength of Chinese car companies to make up for its own shortcomings in the field of intelligent driving, the source said.

In March 2019, FAW-Volkswagen officially unveiled the new Jetta brand, as well as three new models of the Jetta brand, allowing the brand to start operating independently.

In a separate report on July 20, Cailian said Leapmotor was in talks with an overseas company about a technology partnership and had made substantial progress.

Leapmotor has layouts in the core areas of smart cars, including batteries, motors, electronic control systems, smart driving, and smart cockpits, and the technology output is expected to become the company's second source of profit outside of vehicle sales, the report said.

On July 31, Leapmotor Chairman Zhu Jiangming said after a technology conference that the company has basically finalized the deals to provide vehicle technology licenses to the two companies.

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