VW announces new factory in China
(Agencies)
Updated: 2004-06-11 15:12

Volkswagen (VW) plans to open a new factory in China next year to boost production capacity that the German automaker said it needs to meet the booming demand in the world's fastest-growing market.

The new US$240-million factory in Shanghai will be able to produce 150,000 cars a year, VW executives said Thursday at a news conference during Auto China 2004, China's biggest car show. They said construction would begin next week.

Volkswagen is China's dominant foreign automaker, with some 30 percent of the market.

But its factories haven't been able to keep up with the burgeoning demand, holding sales growth to just 3 percent for the first half of this year, while the overall market grew by 40 percent, said Folker Weissgerber, VW's executive in charge of China.

"We will have to wait a few months. Work is under way to expand capacity," Weissgerber said.

VW sold 700,000 cars last year to China's increasingly affluent drivers, according to Weissgerber. He said that was an increase of 36 percent over 2002.

VW also has applied for Chinese government permission to build two new engine factories at a total cost of US$636 million, Weissgerber said.

Volkswagen currently has manufacturing centers in Shanghai and the northeastern city of Changchun -- both with Chinese partners. In Shanghai, Volkswagen has a partnership with Shanghai Automotive Industries Corp. In Changchun, it has a partnership with First Auto Works.

The vehicles VW sells in China are made in China. While a small number of vehicles from the Shanghai operation are for export, production in China is aimed at satisfying demand in China.

VW's announcement comes amid massive expansion plans by foreign automakers in China, where car sales jumped 75 percent last year and are expected to total as many as 10 million vehicles annually by 2010.

VW said last year it planned to invest some US$7.4 billion in China. Weissgerber said plans also call for opening a new company later this year to finance car purchases.

Lasy year, China accounted for US$7.8 billion of VW's sales of US$15 billion in the Asia-Pacific region, according to Hans Dieter Poetsch, a VW finance executive.

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