Volkswagen to ramp up local production

To further consolidate its lead in China, Volkswagen Group has announced plans to expand local production and introduce a low-price model aimed at entry-level consumers.

By 2018, the company aims to increase its annual production capacity in China to more than 4 million vehicles, said company CEO Martin Winterkorn at the group's annual press conference.

Volkswagen will build a minimum of 10 additional plants worldwide in the coming years, of which seven will be in China, Winterkorn said.

He said the group will open three vehicle plants this year. One will be located in the west in Urumqi, Xinjiang Uygur autonomous region. Another will be in the south in Foshan, Guangdong province, while the third will be in Ningbo, Zhejiang province, in the east.

Additionally, the company will open new component plants in Changchun, Jilin province, and Foshan this year, and a gearbox plant in Tianjin will follow in 2014, the CEO said.

Winterkorn said the supervisory board has also just resolved to construct an additional vehicle plant in China. Up to 300,000 vehicles will be produced there annually starting in 2016.

Although Winterkorn did not disclose the specific location of the planned facility, industry insiders said that it will most likely be in Changsha, capital of the central province of Hunan.

Last year, the Hunan Research Academy of Environmental Science published a note on its website soliciting public feedback on the possible environmental impact of a plant planned by Volkswagen's joint venture with SAIC Motor Corp. Passing this environmental assessment is one of the prerequisites for foreign companies to gain final regulatory approval on new projects.

The company now operates two joint ventures in China, one with SAIC and another with FAW, producing cars under the brands of Volkswagen, Audi and Skoda. In total, it now has 12 plants making vehicles and parts across the country.

Last year, Volkswagen's sales increased 24.5 percent to 2.8 million vehicles in China. The nation has been the largest market worldwide for Volkswagen since 2009.

To further tap the market potential here, Volkswagen will "launch a true budget car for China" in the near future, Winterkorn said.

The car will cost around 6,000 to 7,000 euros ($7,800 to $9,000).

Though less expensive cars generally have a lower profit margin, Winterkorn said he is convinced that the company will prove that "quality, attractive pricing and profitability are not mutually exclusive".

The company currently offers three low-priced models in China - the Polo, the Jetta and the Santana. Prices usually start at 70,000 yuan.

hantianyang@chinadaily.com.cn