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Volkswagen to Build Factory in Eastern China in Move to Double Production
Volkswagen AG, Europe’s largest carmaker, will build an assembly plant in eastern China as part of a plan to double capacity in the world’s biggest auto market within four years.
The factory in Yizheng, Jiansu province, will have a capacity to build 300,000 vehicles and will begin production in 2013, Wolfsburg, Germany-based Volkswagen said in a statement today. VW announced plans last month to build a factory in Foshan in the southern province of Guangdong.
The two factories will increase VW’s production sites in China to 11 and give the carmaker an annual capacity in the country of 3 million vehicles. VW is investing 6 billion euros ($7.7 billion) to expand in the country as vehicle sales boom.
“It’s a sensible step to take as China’s long-term growth prospects still have to be judged very positively,” said Marc- Rene Tonn, an analyst at M.M. Warburg in Hamburg, who recommends buying VW shares.
Volkswagen, the biggest foreign carmaker in China, boosted sales in that market by 46 percent in the first six months to 950,278 vehicles. VW sold 1.4 million cars and sport-utility vehicles in China last year and aims to more than double output to 3 million units as early as 2013, Chief Executive Officer Martin Winterkorn said on June 9.
‘Vital Market’
The manufacturer has added models including the Tiguan sport-utility vehicle, the Audi Q5 and an upgraded Jetta this year to boost deliveries in its biggest market. VW started sales of the CC four-door sports coupe today in Shanghai.
“China’s low vehicle penetration rate makes it a vital market for companies like Volkswagen,” said Qin Xuwen, an analyst at Orient Securities Co. in Shanghai.
Sales of cars, sport-utility vehicles and multipurpose vehicles in China rose 10.9 percent in June to 839,228, according to the China Automotive Technology & Research Center. Growth slowed from 25 percent in May and 34 percent in April as inflation accelerated, reducing consumers’ purchasing power.
China is critical to Winterkorn’s goal of surpassing Toyota Motor Corp. in sales and profitability by 2018. VW will build the Foshan plant with its Chinese partners, FAW Volkswagen Automotive Company Ltd., and said today that the Yizheng factory will be set up with its second joint venture, the Shanghai Volkswagen Automotive Company Ltd.
Daimler, Nissan
VW’s preferred shares fell as much as 1.27 euros, or 1.6 percent, to 76.03 euros and were down 0.5 percent at 10:30 a.m. in Frankfurt, valuing the company at 34.5 billion euros.
Daimler AG, the world’s second-largest luxury carmaker, announced plans in May to build a Chinese engine factory as part of a 3 billion-euro investment there. Nissan Motor Co. is enlarging its plant in Guangdong and aims to build as many as 600,000 vehicles there a year by 2012, from 430,000 units currently, the company said in April.
Honda Motor Co. said in May that it plans to double the capacity of its Zengcheng plant to 240,000 vehicles a year by the second half of 2011. The expansion will raise Guangqi Honda’s total capacity in Guangzhou by a third to 480,000 units annually from 360,000. Toyota said on April 28 it will start building Corolla cars at a factory in Changchun in the first half of 2012.
To contact the reporters on this story: Andreas Cremer in Berlin at acremer@bloomberg.net; Tian Ying in Beijing at ytian@bloomberg.net.
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