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Volkswagen plans to build plant in China

Volkswagen, which increased deliveries in 2003 by 36 percent to some 698,000 cars in China, also builds cars for the local market with its other joint venture partner, First Automobile Works.
/ Source: Reuters

Volkswagen AG plans to build a new automotive plant in China to help it reach an annual production capacity of 1.6 million vehicles by 2008, Europe’s largest carmaker said Sunday.

VW Chief Executive Bernd Pischetsrieder and management board member Folker Weissgerber signed a corresponding letter of intent Sunday together with one of its two Chinese partners, Shanghai Automotive Industry Corporation.

Volkswagen, which increased deliveries in 2003 by 36 percent to some 698,000 cars in China, also builds cars for the local market with its other joint venture partner, First Automobile Works.

“This year we’re aiming to produce and sell more than 800,000 vehicles in China,” Pischetsrieder said. “We will double this volume by 2008.”

The agreement was signed during an official visit by Chinese Prime Minister Wen Jiabao to VW’s luxury unit Audi in Ingolstadt.

Following a review of its operating efficiency and utilization, the group plans to sign a contract to erect the factory near Shanghai, which will have an initial capacity of 150,000 vehicles per year starting in 2006.

The carmaker also said Sunday that its Shanghai Volkswagen joint venture would increase its capital by 1.5 billion renminbi to 7.8 billion in connection with the launch of its Touran compact minivan in China this year.

Due to its high-double digit growth rates, the Chinese passenger car market became Volkswagen’s most important single market outside of Germany in 2002. The group has a market share of more than 30 percent in China.

Based on current exchange rates, VW plans to invest roughly 5.3 billion euros ($6.27 billion) in China over the next five years. The group is also considering the construction of a new engine factory there.

VW’s premium brand Audi aims to boost vehicle sales by roughly 10 percent in China this year, the unit’s CEO said on Sunday.

“Should the trend from the first quarter continue, we expect to sell approximately 70,000 Audi’s sold,” Chief Executive Martin Winterkorn told reporters on Sunday.

Audi deliveries to China rose by more than 70 percent to 63,531 vehicles in 2003.