Continental in $1.3b drive to expand in China

The Continental AG logo stands on display outside the company's automotive powertrain division factory in Regensburg, Germany, on Tuesday, Feb 25, 2014. [Photo/CFP]

German automotive supplier Continental AG plans to invest at least 1 billion euros ($1.34 billion) in China over the next five years to fuel its growth in the world's largest vehicle market.

"We have made investments of about 1 billion euros in the local market during the past five years, and we will maintain the investment scale at least at the same level in the coming five years," said Elmar Degenhart, chief executive officer of the Hanover-based company.

The money will go into new factories and the expansion of existing ones, further localization and the recruitment and training of new employees. It will also be used to step up research and development.

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The expansion includes the doubling of capacity at its tire plant in Hefei, Anhui province, to 8 million units annually. A second factory for electronics systems will be built in Wuhu, Anhui province, soon.

"In 2013, Continental's sales in China reached 3.3 billion euros, almost 10 percent of the global total. We believe the proportion will be doubled to 20 percent by 2020 ... assuming that we still see business growth in other major countries," said Degenhart.

He estimated this year's revenue in China at about 4 billion euros. In recent years, the group's business has grown at double the market average. And in the past five years, the number of employees doubled to 20,000.

"We expect Continental's annual revenue in China will grow to 10 billion euros after 2020," he said. "China is a market with significantly high importance to Continental worldwide."

He said his confidence is based on a belief in stable economic growth in China, as well as the long-term sustainable growth of the domestic automotive market.

"Continental will maintain a growth speed that's always faster than the market average," he said.

Degenhart spoke while on a one-week trip to China to visit local original equipment manufacturers.

"We are seeking business opportunities from Chinese domestic automakers, who are losing market share and in urgent need of higher-end technologies and products to help increase their competitiveness,"said Degenhart.

According to the China Association of Automobile Manufacturers, the combined market share of Chinese OEMs dropped 3.12 percentage points year-on-year last month to 34.6 percent. It was the 11th consecutive month of decline.