VW copes with Europe slump by expanding Brazil plants, exporting to China

Article by Anita Panait, on October 24, 2012

German carmaker Volkswagen is trying to cope with the dwindling demand for vehicles at its European home market by expanding plants in Brazil and exporting cars to China, chief executive Martin Winterkorn disclosed at the ongoing 27th Sao Paulo International Motor Show. Winterkorn said that VW has limited its vehicle production in Europe to avoid the inventory pileup of vehicles left unsold.

VW’s top honcho remarked that to boost plant usage in Europe, the carmaker intends to export 200,000 cars, including Audi and Skoda models, to China in 2013, as the German company becomes "more cautious" in Europe.

Winterkorn added that to reduce VW’s exposure to Europe, the carmaker also intends to invest EUR3.4 billion ($4.4 billion) for upgrading its model lineup and plants in Brazil through 2016. The investment includes EUR126 million at its Sao Carlos component plant to increase daily production to 4,800 engines from the current 3,800 units.

Winterkorn described Brazil as a “cornerstone" of VW's strategy to become the largest carmaker in the world by 2018. A bleak year for the European car market has not discouraged VW to remain glued to its 2012 full-year targets, which includes equaling its EUR11.3 billion operating profit posted in 2011. The German carmaker has built a strong position in Brazil for nearly six decades.

Brazil is currently VW’s third largest market. According to IHS Automotive, vehicle sales in Brazil would jump 8.6 percent to 3.28 million vehicles in 2012. VW is expecting further growth potential in Brazil, which boasts of a young population and where 40 percent of its residents have the potential to become first-time car buyers. VW recently unveiled at the Sao Paulo auto show a two-door variant of its Gol hatchback as a new entry-level offering in the market.

Topics: vw, brazil, china

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