VW to Expand Chinese Line-Up 29% by 2015 to Propel Sales

Volkswagen AG, Europe’s largest automaker, plans to expand its model line-up 29 percent by 2015 in China, a market the manufacturer sees as crucial in its drive to take the industry’s global top spot in five years.

Volkswagen will offer 90 cars, sport-utility vehicles, vans and heavy trucks in the country compared with 70 models now, Jochem Heizmann, who runs the carmaker’s Chinese operations, said today at a Shanghai press conference. VW is targeting at least 3 million deliveries in China this year, he said.

The manufacturer outlined plans in March to increase production 60 percent by 2018 in China, where Wolfsburg, Germany-based VW’s earnings last year surged by almost half. Volkswagen has set that year as its deadline for overtaking Toyota Motor Corp. and General Motors Co. as the world’s biggest carmaker. Heizmann said today that VW will work to grow faster than the 6 percent to 8 percent annual estimated expansion of Chinese car market in the next three to five years.

“It’s crucial to have new products to take part in the future growth of the Chinese market,” said Frank Biller, a Stuttgart, Germany-based analyst with LBBW. “Chances are high” that VW will beat industrywide gains in the country.

Stock Gains

Volkswagen rose as much as 1.7 percent to 140.80 euros, the biggest intraday gain since April 2, and was trading up 1.3 percent at 10:23 a.m. in Frankfurt. That pared the stock’s decline this year to 18 percent, valuing the company at 63.7 billion euros ($83.3 billion).

VW’s 9.8 billion-euro project to build factories and develop models in China by 2018 will be the country’s largest-ever automotive-investment program, Chief Executive Officer Martin Winterkorn said today in a statement distributed at the press conference held in advance of the Shanghai Auto Show. The company will expand its workforce by 33 percent to more than 100,000 employees in the period, he said.

Electric cars will be among the new models to be introduced in 2014 and 2015, with some of the vehicles built at VW’s joint ventures in China, Heizmann said.

New Factories

VW is counting on growth in China and the U.S., along with gains in the luxury-car segment with the Audi brand, to offset dropping demand in Europe amid a recession. China, already VW’s biggest national market, may expand to account for 37 percent of the German carmaker’s global volume in 2015 from 28 percent in 2010, according to LMC Automotive research company.

The first quarter in the country was “fantastic,” though predicting business in coming months is difficult because the Chinese market situation is “challenging,” Heizmann said.

Targets that VW announced for China in March include adding seven car plants in the country, bringing the total to 19, and increasing production capacity there to 4 million vehicles a year by 2018 from about 2.5 million currently.

“So you heard about the 4 million production capacity,” VW China Executive Vice President Weiming Soh said at the press conference today. “I guess as a sales guy I can’t say I will sell less.”

Audi is targeting faster growth in China than its premium competitors, and plans to expand its dealership network there by 67 percent to 500 outlets in 2017 from about 300 now, Dietmar Voggenreiter, the unit’s head of Chinese business, said at the briefing.

Recall Effects

Including its local joint ventures, VW’s group sales last year in China jumped 25 percent to 2.81 million vehicles. Its deliveries in March in the market, including Hong Kong and Macau, rose 11 percent, lagging behind the market’s 13 percent gain, following customer complaints that led to a 384,181-vehicle recall to fix vibrations, power and acceleration faults.

The recall, which started April 2, is “progressing smoothly,” and Heizmann is personally overseeing the recall with daily reviews to make sure it’s being handled properly. he said today.

“We’re in a proactive dialog with all relevant government organizations,” Heizmann said “customer satisfaction remains a key priority for us,” which has led to the establishment of a task force to look into quality issues.

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