Volkswagen will raise its production capacity in China to 3 million units by 2014, with new facilities such as the new 300,000-unit-capacity Ningbo plant in Zhejiang province which will be ready by 2013, the automaker says in a release sent to IHS Automotive.
IHS Global Insight Perspective | |
Significance | VW will invest up to EUR14 billion by 2016 in China to expand its model line-up and production capacity in China. |
Implications | VW produces more than 20 models under its VW, Audi, and Skoda brands in China, but will look to expand the line-up of locally produced models as well as increase capacity with new plants and production lines at its joint venture factories under Shanghai-VW and FAW-VW. |
Outlook | Shanghai-VW has started construction of a new 300,000-unit production plant in Ningbo in China's coastal Zhejiang province, which will begin production in 2014, as well as a new plant in Yizheng in Jiangsu province while a new FAW-VW plant is under construction in Foshan in Guangdong province. |
Volkswagen (VW) is investing EUR14 billion to cement its presence in China with new expansions and facilities, and plans to raise production to 3 million units by 2014. "China has become one of the largest and one of the most important markets for Volkswagen Group", said Dr. Karl-Thomas Neumann, President and CEO of the Volkswagen Group China (VGC) speaking in Ningbo at the signing ceremony for the new Ningbo plant on Friday (6 January). To meet the increasing demand of the Chinese customers more production capacity is needed, he added. "With our unprecedented investment program, we intend to increase our capacities in China to three million vehicles per year by 2013/14."
SVW Expansion
VW aims to have production capacity in China for 3 million units by 2014. The German automaker is currently building new plants under its Shanghai-VW (SVW) joint venture (JV) in Ningbo in Zhejiang province and Yizheng in the neighbouring Jiangsu province. The Ningbo plant will have capacity to build 300,000 units and is scheduled to open in 2014, while the Yizheng plant will also have production capacity of 300,000 units and will begin production this year, IHS Automotive analysts forecast.
SVW currently has three production lines in Shanghai and one in Nanjing. The three Shanghai plants have a total combined capacity of 780,000 units per year but SVW has been running the plants at heightened capacity for the last few years at three shifts per day, rather than the planned two shifts per day thereby raising capacity at the plants to around 1 million units per annum, IHS Automotive production analyst Boni Sa says. SVW has also expanded capacity at the plant in Nanjing to 300,000 units while IHS Automotive expects another production line to be announced in Ningbo.
FAW-VW Expansion
FAW-VW is also building a new plant in Foshan, in Guangdong province, that will begin production in 2013 and has capacity to produce 300,000 units. It also opened a new factory in October in Chengdu, adding to the existing FAW plant at which some 30,000 VW Jetta cars were produced annually. Construction of the plant began in 2009 with total investment of CNY7.7 billion (USD1.2 billion). The plant is designed to produce 450,000 units annually. A VW spokesperson confirmed to IHS Automotive that the plant began production in October 2011. It also has two production lines in Changchun in Jilin province with capacity to produce over 700,000 units, and is likely to add another new plant in China, as yet not revealed by the automaker.
Outlook and Implications
VW is a strong player in China with local production under its Audi, Skoda and VW brands, and is expected to bring in the SEAT brand to China. VW's other luxury brands will remain imports. VW will expand its line-up of locally produced models across its three main volume brands and will also increase production across China with new plants and expansions.
VW has recently been linked with plans to build a base in Urumuqi in north-west China (see China: 7 December 2011: VW Plans CNY2-Bil. Plant in China's Xinjiang Region). Andreas Hoffbrauer, spokesperson for VW in China, gave IHS Automotive this statement: "As the Chinese market for passenger cars is still growing, we are always in discussion about possible additional factory locations in China. Therefore, we are always in contact with our two partners and with Central and Provincial government agencies. But we cannot talk about further locations before having reached an agreement with our partners and Chinese Government agencies".
IHS Automotive expects VW to add capacity and plants under its two JVs in China, with total production capacity expected to reach 3 million units by 2016. IHS Automotive analysts note that VW has rapidly advanced its expansion plans and we have brought forward our VW China production forecasts to 3 million units from 2018 to 2016. VW brands have all seen strong sales through 2011 in China, with Audi's 2011 sales rising to over 300,000 units for the first time in China (see China: 6 January 2012: Audi China Sells over 300,000 Units in 2011, Up 37%).