VW and partner FAW to invest €2 b in Chinese plants

German carmaker says agreement with FAW on new factories shows its commitment to China, its largest and most important market

PUBLISHED : Tuesday, 08 July, 2014, 1:54am
UPDATED : Tuesday, 08 July, 2014, 1:54am


German carmaker Volkswagen will build two plants on the mainland as it invests €2 billion (HK$21 billion) along with mainland partner FAW, it announced yesterday during a visit by German Chancellor Dr Angela Merkel.

The agreement for the new factories in the world's biggest car market was signed in the presence of Merkel and Premier Li Keqiang, VW said.

VW and FAW would together spend about €2 billion to expand production capacity. It was not clear what the cost of the new factories, in Tianjin and Qingdao, Shandong province, would be, nor how the investment would be apportioned.

The VW statement also failed to specify the annual capacity of the two plants or when they were expected to start production.

"With these investments, Volkswagen is clearly expressing its commitment to the Chinese market," Volkswagen Group China president Jochem Heizmann said.

The sites were selected due to their "high qualification levels and the infrastructure available", the statement said.

VW said the mainland had become its largest and most important market. It sold more than 1.5 million vehicles on the mainland in the first five months of this year, including sales by its two joint ventures, FAW Volkswagen and Shanghai-Volkswagen, up 17.7 per cent year on year.

The new plants fit into VW's plans to overtake Toyota Motor Corp as the world's largest carmaker by 2018.

Foreign carmakers are adding factories on the mainland to cater to growing demand in the world's second-largest economy, where the number of motorists is estimated to swell to one billion in the next 10 to 15 years.

VW chief executive Martin Winterkorn said in April he expected the company's mainland deliveries this year to rise at least 10 per cent from last year's record, pushing them to more than 3.5 million vehicles.

Merkel is on a three-day visit to China - her seventh since 2005 - with economic ties topping the agenda and a high-powered business delegation in tow, including executives from Siemens, Airbus, Lufthansa and Deutsche Bank.

She toured a VW factory in Chengdu, Sichuan province, on Sunday.

The mainland is a crucial mass market for Germany, the European Union's biggest economy. Mainland firms want its technology and millions of newly prosperous citizens crave German goods ranging from Audi cars to luxury home appliances.

Germany last year sold goods worth €67 billion to China, its No2 export market outside Europe after the United States. Imports from China, meanwhile, topped €73 billion.

Agence France-Presse, Bloomberg