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Volkswagen planning new Guangzhou assembly plant

By Han Tianyang and Xiao Gong (China Daily)
Updated: 2010-02-01 08:01

Volkswagen planning new Guangzhou assembly plant
A dominant player in the north, in 2008 Volkswagen had just 12 percent of the market in southern China. [China Daily]

German auto giant Volkswagen plans to build a 300,000-unit plant in Guangzhou with partner FAW Group Corp in a bid to grab more market share in south China, according to an anonymous source with knowledge of the project.

The source denied recent reports that the Guangzhou plant will produce cars under Volkswagen's Spanish brand Seat, underscoring only Volkswagen brand vehicles will be made at the new facility when it begins operation in 2013.

The insider declined to comment on investment levels or other details of the plan.

Since it began operations in China in 1984, Volkswagen has mainly focused on the north and east of the nation, while Japanese brands Toyota, Honda and Nissan have long prevailed in southern markets.

A Volkswagen production facility in Guangzhou - the long-established base of major Sino-Japanese joint ventures - marks a significant move south for the automotive icon.

The German carmaker unveiled a strategic plan last year designed to further tap southern areas including Zhejiang, Jiangxi, Fujian, Guangdong, Hainan and the Guangxi Zhuang autonomous region.

According to the plan, Volkswagen aims to more than triple its sales to half a million units in those markets in the next three to five years from 150,000 units in 2008. The company also expects to raise its market share in the region to between 17 and 20 percent from 12 percent in 2008.

The Guangzhou plant will be Volkswagen's fifth production facility in the country. It now has plants in four cities with two local partners - FAW Group and SAIC Motor Co Ltd.

The joint venture between Volkswagen and FAW has two facilities in Changchun in northeast China that make Volkswagen and Audi brand cars. Their combined annual capacity is 660,000 vehicles.

The venture also has a plant under construction in Chengdu, capital of Sichuan province. Its production line will start operation at the end of this year and mainly make Volkswagen's Jetta model. The short-term capacity of Chengdu plant is projected to be 350,000 units.

SAIC-Volkswagen's factory in Shanghai now has an annual capacity of 660,000 units and produces Volkswagen and Skoda brand cars. The joint venture also runs a plant that mainly builds the Santana model in Nanjing, capital of Jiangsu province. The Nanjing plant is projected to eventually produce 300,000 units annually.

In an effort to expand capacity at its Nanjing and Chengdu plants, Volkswagen will invest 4 billion euros ($5.66 billion) over the next three years, according to a plan released last September. Part of the funding will be used to bring new domestically made models to the Chinese market. The company plans to introduce some 20 new and upgraded models to Chinese buyers between 2010 and 2012.

With a production base in Guangzhou, Volkswagen could eventually build its total capacity to around 2.3 million units in China, which is already the German automaker's No 1 market.

Last year Volkswagen reported a staggering increase of 36.7 percent in its full-year China sales to a total of 1.4 million vehicles, 160,000 units more than its sales in Germany.

The company's long-term plan is to achieve annual sales of more than 2 million units in China by 2018. Analysts generally believe that Volkswagen is likely to reach the goal ahead of schedule based on its brisk sales and active expansion in capacity.