Volkswagen sides with 2008 Games
By Gong Zhengzheng (China Daily)
Updated: 2004-06-10 22:09

German automaker Volkswagen was chosen Thursday as the official automobile partner of the Beijing 2008 Olympic Games.

Volkswagen, the biggest passenger car manufacturer in China, beat a slew of strong rivals, such as DaimlerChrysler, Hyundai Motor and BMW to win the exclusive partnership in the auto industry.

The partnership will be under the name of Volkswagen Group China, the German firm's newly created entity for the Chinese car market.

"This is the first result of the marketing plan of the Beijing Organizing Committee of the 2008 Olympic Games (BOCOG) and we will announce partners in other industries (of bank, petroleum and telecommunications) in the near future," said Wang Wei, vice-chairman of BOCOG.

The marketing plan kicked off last September.

"We hope the Beijing 2008 Olympic Games will be our chance to give something back to society and the people of China, whose enthusiastic support we have enjoyed for many years," said Folker Weissgerber, a Volkswagen board member.

The carmaker's bold move was announced with the Beijing International Motor Show in the background.

The show opened to the public Thursday.

More than 1,400 foreign and domestic vehicle and component companies are flaunting their products during the seven-day motor show.

Organizers of the motor show only issued 400,000 tickets in fears of overcrowding.

In contrast, car sales in China are cooling down.

Sales of all China-made vehicles and passenger cars declined by 8.24 per cent and 2.72 per cent in April.

"The slow down in car sales is mainly a result of customers' hesitation to buy because of frequent price cuts and government policies, such as controls on car loans of banks," said Zhang Xin, an auto analyst with Guotai & Jun'an Securities Co.

"I'm looking forward to further price cuts and new models... I have decided not to buy a car this year," motor show visitor Liu Zhitian told China Daily.

Prices on the domestic car market will continue to decline because of increasing battles between manufacturers, and China's expected removal of quota and further tariff cuts on car imports.

The nation will cancel the quota next year and slash the tariffs to 25 per cent in 2006 according to its commitments to the World Trade Organization.

"There is still much room for price cuts of cars in China as profit margins of producers in China remain much higher than in the developed markets," Zhang said.

Experts also warn of overcapacity, oil supply, transportation and environment conditions to curb the auto industry's future development.

However, foreign automakers, especially Volkswagen, are still upbeat about China's car market.

Weissgerber predicted that China's passenger car market will grow to 4.6 million units by 2008 and 8.5 million units annually by 2014, up from 2.2 million units last year.

Volkswagen plans will invest some 60 billion yuan (US7.2 billion) by 2008 in China, the biggest input during the period announced by a foreign automaker.

He said the car-maker and its joint venture partner First Automotive Works Corp (FAW) plan to invest 290 million euros (US$3.5 billion) to build a new engine joint venture in Dalian, a port city in Northeast China.

Volkswagen sold 697,000 cars last year in China, controlling 30.8 per cent of the total market volume.

It now runs two car joint ventures in China with FAW and Shanghai Automotive Industry Corp.

Almost all of the other world's auto giants, such as General Motors, Ford, Toyota, DaimlerChrysler and BMW, have built one or more car joint ventures in China.