Volkswagen Group plans to spend EUR2-billion ($2.7 billion) to build two more vehicle assembly sites in China, as part of a grander plan to invest EUR18.2 billion in China through 2018 to expand capacity and hike the number of produced models in the country. VW plans to build the assembly sites in the cities of Qingdao and Tianjin.
VW chief executive Martin Winterkorn said in a statement that China has become the carmaker’s largest and most important market. He added that VW is engaging in a further substantial capacity expansion in China together with partner FAW Volkswagen to satisfy the demands of its customers in the country.
VW Group sold around 1.51 million vehicles in China in the first five months of 2014, good for an 18-percent surge. Winterkorn remarked in April that he expects the carmaker’s China sales to surge at least 10 percent from the figures in 2013, which means deliveries would top 3.5 million vehicles this year.
The new two sites is part of Volkswagen's goal to surpass Toyota Motor Corp. as the largest carmaker in the world in terms of sales by 2018.
More and more foreign carmakers are adding manufacturing facilities in China to take advantage of the growing demand for vehicles in the country, where the number of licensed drivers is expected to reach 1 billion in the next 10 to 15 years.
"China has become our largest and most important market. 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," said Prof. Dr. Martin Winterkorn, Chairman of the Board of Management of Volkswagen AG, who witnessed the signing of the declaration.
Volkswagen operates in China through Volkswagen Group China. It has two major partnerships in the country: Shanghai Volkswagen Automotive Co., and FAW-Volkswagen Automotive Co.
Shanghai Volkswagen is a joint venture between Volkswagen and Shanghai Automotive Industry Corporation. Formed in 1984 in Shanghai, Shanghai Volkswagen is owned 50 percent by Shanghai Automotive Industry Corporation, 40 percent by Volkswagen Group and the remaining 10 percent by Volkswagen China Investment Co. It builds models for the Volkswagen and Skoda brands.
On the other hand, FAW-Volkswagen Automotive Co., Ltd was established in February 1991 as a joint venture between China FAW Group Corporation (51 percent), Volkswagen AG (20 percent), Audi AG (10 percent), and Volkswagen (China) Investment Co., Ltd. (19 percent). FAW-Volkswagen Automotive is considered as first modern car maker to be built in China employing economy of scale from the start.