VW to Spend $2.7 Billion Building Two Factories in China

Volkswagen AG (VOW), which outsold General Motors Co. (GM) in China last year, will invest 2 billion euros ($2.7 billion) to construct two new vehicle plants in the world’s biggest auto market.

VW plans to build the plants in the coastal cities of Qingdao and Tianjin, according to the Wolfsburg, Germany-based carmaker, which owns a dozen automotive brands and counts China as its largest market.

“China has become our largest and most important market,” VW Chief Executive Officer Martin Winterkorn said in the statement. “To satisfy the demands of our customers in the country, we are engaging in a further substantial expansion of our capacities in China together with our Chinese partner FAW Volkswagen.”

The new plants fit into Volkswagen’s plans to overtake Toyota Motor Corp. (7203) as the world’s largest automaker by 2018. Foreign automakers are adding factories in China to cater to growing demand in the world’s second-largest economy, where the number of licensed drivers is estimated to swell to 1 billion in the next 10 to 15 years.

VW Group delivered about 1.51 million vehicles in China in the first five months of this year, an 18 percent increase over the corresponding period a year earlier, according to the company. Winterkorn said in April he expects VW’s China deliveries to rise at least 10 percent from last year’s record, pushing deliveries to more than 3.5 million vehicles.

The Wolfsburg, Germany-based company had said it is investing 18.2 billion euros in China through 2018 to expand capacity and increase the number of models produced in China.

To contact Bloomberg News staff for this story: Alexandra Ho in Shanghai at aho113@bloomberg.net

To contact the editors responsible for this story: Young-Sam Cho at ycho2@bloomberg.net Chua Kong Ho

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.