Volkswagen to make first cars with China's JAC by 2018

BEIJING (Reuters) - Volkswagen AG plans to make its first cars with China's Anhui Jianghuai Automobile (JAC Motors) <600418.SS> by 2018 and hopes the joint venture will get government approval in the first half of this year, its China CEO said on Thursday.

Jochem Heizmann made the comments at a media briefing in Beijing. Germany's Volkswagen and JAC Motors signed a preliminary deal in September to explore making electric vehicles..

Heizmann also said Volkswagen expected the Chinese auto market to grow at a slower pace of five percent in 2017, the same prediction made by China's automakers association this month, as tax incentives for small-engined cars are rolled back.

Volkswagen delivered 3.98 million vehicles in China last year, an increase of 12.2 percent on 2015, making it the biggest foreign automaker in the country. Heizmann said it planned to invest 4 billion euros ($4.3 billion) in China this year via joint ventures.

China's auto market, the world's largest, got a shot in the arm after the government cut taxes on cars with engines of 1.6 liters or less in late 2015, helping lift growth in vehicle sales to 13.7 percent last year.

Volkswagen is known for its particularly strong offerings in that part of the market, such as the Passat sedan.

The purchase tax on cars with engines of 1.6 liters or less in China rose to 7.5 percent this year from 5 percent in 2016. It will return to 10 percent in 2018.

(Reporting by Jake Spring; Writing by Brenda Goh; Editing by Jacqueline Wong and Mark Potter)

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