VW to build Chinese plant

Volkswagen announced plans today to open a new factory in China next year to boost production capacity that the German car maker said it needs to meet the booming demand in the world’s fastest-growing market.

The new £130m (€197m) factory in Shanghai will be able to produce 150,000 cars a year, VW executives said at a news conference during Auto China 2004, China’s biggest car show. Construction will begin next week.

Volkswagen is China’s dominant foreign car maker, with some 30% of the market.

But its factories have not been able to keep up with the burgeoning demand, holding sales growth to just 3% for the first half of this year, while the overall market grew by 40%, said Folker Weissgerber, VW’s executive in charge of China.

“We will have to wait a few months. Work is under way to expand capacity,” Weissgerber said.

VW sold 700,000 cars last year to China’s increasingly affluent drivers, according to Weissgerber. He said that was an increase of 36% over 2002.

VW also has applied for Chinese government permission to build two new engine factories, Weissgerber said.

VW’s announcement comes amid massive expansion plans by foreign car makers in China, where car sales jumped 75% last year and are expected to total as many as 10 million vehicles annually by 2010.