By Trefor Moss and Martin Mou 

SHANGHAI-- Volkswagen AG is investing EUR1 billion ($1.11 billion) in a Chinese auto maker and a further EUR1.1 billion in a local battery producer, the company said Friday, in the latest bet by the German auto maker on the Chinese electric-vehicle sector.

Volkswagen is increasing its stake in an existing joint venture with JAC Motors to 75% from 50% through the acquisition of half of JAC's parent company, state-owned Anhui Jianghuai Automobile Group. The joint venture focuses on electric vehicles.

The joint venture will introduce up to five additional electric car models by 2025, Volkswagen said. The annual output of the joint venture will increase to up to 400,000 vehicles by 2029, the Chinese car maker said.

Separately, Volkswagen said it took a 26% stake in Guoxuan High-Tech Co., also known as Gotion High-Tech, becoming the Shanghai-listed EV battery company's biggest shareholder.

Both JAC and Guoxuan are based in the city of Hefei, 300 miles west of Shanghai.

China is the world's biggest automotive market and an early leader in adopting electric vehicles, but has been confronting a slump in demand. The Chinese government had set a goal of selling two million electric vehicles this year, but analysts expect only around 1.1 million vehicles to find buyers, down about 10% from last year.

In 2025, China is aiming for new-energy vehicles, including electric cars, to account for a quarter of vehicle sales in the country.

Write to Trefor Moss at Trefor.Moss@wsj.com

(END) Dow Jones Newswires

May 29, 2020 03:34 ET (07:34 GMT)