Volkswagen's Bora and Jetta models are displayed outside its dealer shop in Beijing. Photo: Reuters/Kim Kyung-Hoon

BEIJING (Reuters) – Volkswagen AG is exploring a potential joint venture with Chinese automaker Anhui Jianghuai Automobile (JAC Motor), Chinese media reported on Wednesday.

JAC said in a statement on the Shanghai stock exchange late Tuesday that it was halting trading in its shares because it planned to sign a cooperative memorandum of understanding but gave no further details.

Volkswagen’s Bora and Jetta models are displayed outside its dealer shop in Beijing, China, October 1, 2015. REUTERS/Kim Kyung-Hoon/File Photo

State-owned newspaper China Daily reported, citing sources, that VW and JAC likely aim to build a new joint venture together. Independent financial news outlet Caixin also reported that VW was the unnamed potential partner mentioned in JAC’s filing.

According to Caixin, the joint venture would be aimed at making electric cars, with sales in the so-called “new energy vehicle” segment having more than quadrupled in China last year thanks to a raft of government incentives and targets.

An official in JAC’s media office declined to comment in advance of a public announcement.

A Volkswagen spokesman said the company would release a statement later on Wednesday when contacted about the matter. He did not elaborate.

Volkswagen is locked in a dead heat with U.S. automaker General Motors for the title of largest automaker in China, the world’s biggest auto market, with GM’s primary joint ventures slightly edging out VW’s to sell the most cars in the market last year, according to automaker association data.

Global auto brands are only allowed to manufacture cars domestically in China through joint ventures with local partners, with automakers typically limited to two JV partners. Volkswagen already has joint ventures with SAIC Motor and China FAW Group.

JAC Motor is the ninth largest automaker in China by group sales, according to the China Association of Automobile Manufacturers.

(Reporting by Jake Spring; Editing by Shri Navaratnam)

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