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Volkswagen spins off Jetta into a Chinese car brand

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Another example of how far automakers are willing to go to tap the world’s biggest car market

Image: Volkswagen

Volkswagen is taking its popular Jetta brand and turning it into an entirely new and separate company that will make cars for China, the German automaker announced Tuesday.

Jetta the automaker will launch as a joint-venture with state-owned Chinese car giant First Auto Works, and will offer three models at the outset: the existing Jetta sedan and two SUVs. Volkswagen didn’t say if the models will be all-electric, but it’s likely some will, based on the Chinese government’s requirement that car companies make and sell a certain percentage of “zero emissions” or “new energy” vehicles.

“This is a very smart strategic move by VW. The Jetta nameplate has a long history in China as a dependable car,” Alysha Webb, a Los Angeles-based journalist and consultant who has written about China’s auto industry for nearly two decades, tells The Verge. “Taking an existing model and adapting it to the China market has a long history among foreign automakers in China; VW has taken it a step further.”

“In China, the Jetta plays an extremely valuable role for us as a Volkswagen model. It has brought mobility for the masses, just like the Beetle once did in Europe,” Jürgen Stackmann, who sits on Volkswagen’s management board and is in charge of sales, said in a statement.

Volkswagen didn’t offer specifics about timing for the new models, or whether they will be sold outside of China. But it did say the new Jetta joint venture will sell its cars using “innovative sales formats” like digital showrooms, mobile sales trucks. The new brand will also set up its own network of dealers.

Companies in China have been expermenting with changing the car buying experience. NIO, an EV startup, has built a small network of lounge-style locations it calls “NIO houses,” where customers can hang out, do work, or even take classes on topics like how to make espresso.

Automakers like Volkswagen have been in China for years, but the country’s recent push toward promoting EVs has made some redouble their efforts. The country is already the largest market for electric vehicles in the world, and the government has been tweaking its rules to make sure it holds onto that lead.

For example, China’s government used to make it impossible for foreign automakers to manufacture cars inside the country without entering into a joint venture agreement like the one Volkswagen has forged with FAW. But last summer, China started loosening those restrictions, which paved the way for Tesla to become the first foreign automaker to build a manufacturing facility there. Tesla recently broke ground on its third Gigafactory, and expects to start production by the end of 2019 at the earliest.

Traditional automakers are also under pressure from technology companies who are moving further into transportation every year. In response, many are throwing money at new ideas, partnering with competitors, or even breaking themselves apart. Volkswagen recently announced a “global alliance” with Ford, which will see the two companies share trucks and vans. On Tuesday, The Wall Street Journal reported Volkswagen is also preparing to invest $1.7 billion in Argo, the self-driving startup that Ford uses to power its autonomous testing cars.