Volkswagen plans 10 billion-yuan factory in Changsha, Hunan

Provincial authorities seek feedback on plant to lift Volkswagen's China output by 10 per cent

PUBLISHED : Wednesday, 24 October, 2012, 12:00am
UPDATED : Wednesday, 24 October, 2012, 4:01am

Volkswagen, Europe's biggest carmaker, was seeking to build a 10 billion yuan (HK$12.4 billion) factory in China that might boost the company's production capacity by more than 10 per cent, state-affiliated bodies said.

The Hunan Research Academy of Environmental Sciences was seeking public feedback on the plant, which would be located in Changsha, the capital of Hunan province, and have a capacity to build 300,000 cars a year, the academy said on its website.

Investment in the factory might total 10 billion yuan, the Changsha National Economic and Technical Development Zone said on its website.

Getting lower-level bureaus to sign off on projects is among the first regulatory steps foreign companies must take before they receive Beijing's approval.

The factory would add to the estimated 2.38 million cars in annual capacity built up by Volkswagen's Chinese ventures, and the disclosures come at a time when a glut in China is forcing carmakers to lower prices.

"If Volkswagen asked me, I would say 'Don't build this plant', because you don't want to have overcapacity," Jochen Siebert, Shanghai-based managing director at JSC Automotive Consulting, said. "We have extreme competition already."

Volkswagen's spokeswoman in Beijing declined to comment.

The company, which has one manufacturing venture with SAIC Motor and another with China FAW, has said it was planning to invest €14 billion (HK$141 billion) by 2016 to expand production in the country, the world's biggest car market.

The venture with SAIC is building factories in Ningbo and Yizheng in Jiangsu province to add to plants already operating in Shanghai and Nanjing, the provincial capital.

The venture with FAW runs production facilities in Changchun in Jilin province and Chengdu in Sichuan, and is building one in Foshan, Guangdong. An assembly facility is also being set up in Xinjiang.

The German carmaker's two Chinese ventures are poised to increase their combined manufacturing capacity by 38 per cent this year, JPMorgan Chase analysts estimated in August. Capacity may increase to 2.81 million next year, they wrote at the time.

Volkswagen was risking overcapacity if it built the Changsha plant before 2018, as other factories came online and competition intensified, Siebert said.

Separately, the World Trade Organisation said yesterday that judges would decide whether Chinese duties on more than US$3 billion of US car exports violated global trade rules.

The anti-subsidy and anti-dumping levies covered more than 80 per cent of US vehicle shipments, the US government said when it lodged its complaint at the WTO on July 5.