Volkswagen to invest around $225 million on new plant in Urumqi, China

Article by Christian Andrei, on April 25, 2012

Volkswagen will shell out around 170 million euros or $225 million for the construction of a new facility in Urumqi, western China, the company disclosed. The plant will be capable of manufacturing 50,000 automobiles yearly beginning 2015. Presently, the automaker operates six vehicle and parts facilities in the nation.

 The automaker's two joint ventures in China are investing a total of 14 billion euros by 2016. The company has previously disclosed that its yearly production capacity in the country would increase to 3 million vehicles as early as 2013. In January, CEO Martin Winterkorn informed reporters that Beijing had approached the automaker with the request to consider expanding its extensive manufacturing presence to the western portion of the nation. The automaker is the first to enter the country. Urumqi is the capital of the province Xinjiang in China.

It is found in a relatively poor part of the country where there are ethnic tensions between the Han Chinese and the Muslim Uighurs. The relatively modest production capacity and investment sum is indicative of the risks. Compared with the 50,000 automobiles that Volkswagen and its local partner Shanghai Automotive (SAIC) plan to assemble in Urumqi, VW-SAIC intends to manufacture six times as many in a new facility in Yizheng near Nanjing, which is close to the country's wealthy eastern coast. Winterkorn referred in a statement to a "30-year success story" that brought together China and Volkswagen.

He stated that as a "pioneer" of the automotive industry in China, they gave "important momentum" to the nation's industrial development and to German-Sino economic relations. He further said that together with its partners, they will now "carry this pioneering spirit" into the western part of the country as well.

Moreover, Volkswagen disclosed that it agreed to expand the joint venture with FAW established in 1991 by 25 years more. FAW is the automaker's second local partner in China. In June 2010, the partners had revealed that they would invest around 520 million euros to construct a factory near Guangzhou, which is the first southern China plant of VW. This facility can assemble at most 300,000 automobiles.

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