Volkswagen plans to nearly double its production in China over the next few years, according to the new head of its operations in the country.
Jochem Heizmann told German weekly magazine Focus that, by 2018, VW will raise production capacity in the country to 4m vehicles.
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The company’s two Chinese joint ventures are investing US$17bn by 2016 and the VW group has said in the past its annual production capacity in China would rise to 3m cars as early as next year.
VW’s two JVs with partners FAW and Shanghai Automotive (SAIC) boosted their output by 15% to 2.2m vehicles last year, accounting for just over a quarter of the group’s global production of 8.5m.
VW is expanding its existing plants in Changchun, Nanjing and Chengdu, and building new factories in Yizheng, Foshan and Ningbo. In April it announced a US$212m investment to build a new assembly plant in Urumqi, in northwest China.
Heizmann has been chosen to oversee VW’s China operations as part of a comprehensive management reshuffle announced earlier this month that affected virtually every group brand.
China remains a priority market where car sales rose 22.6% year on year in May, according to the China Association of Automobile Manufacturers (CAAM).
A total of 1.28m cars were sold in the country during the month, up from 1.94m in May 2011. From January to May, deliveries climbed 5.5% to 6.33m.
This has been led by rebounding sales at Toyota and Honda, both suffered severe shortages of parts a year ago after northern Japan’s earthquake and tsunami in March 2011.
Toyota and Honda saw their sales jump 105% and 92% respectively. General Motors maintained its leading position while SAIC, a longtime partner of GM and VW, was the big domestic winner with a year-on-year growth rate of 21% last month.
Demand is likely to remain solid if the Chinese government renews incentives aimed at boosting demand for minivans and small cars which are popular in lower-tier cities and rural areas.
It is understood that Beijing will soon resume paying subsidies to rural residents who trade in old vehicles for new, fuel efficient models.
Sport utility vehicle sales continued their upward trend reaching162,600 units in May, up 3.87% over April and 58.4% over the same period of last year.
SUVs have become the hot sellers in China’s passenger car market where 760,400 have been sold in the first five months of this year, up 28% year on year.
SUV production totaled 776,300 units in the January-May period, 32.3% ahead of last year.
China is expected to sell about 1.85m SUVs this year with the annual growth rate estimated at 16% according to CAAM.
