VW.jpg (Photo : Reuters)
Volkswagen AG's growth in China is expected to slow to about 10 percent this year from 16 percent in 2013 due to a conservative strategy that has limited its production capacity, VW China chief Jochem Heizmann told Reuters right before the Guangzhou auto show.
Heizmann said that shortage in production capacity is the only reason why Volkswagen's growth rate has lagged behind the overall pace of growth in China's still hot vehicle market. For this year, he said that he is expecting the company to be able to deliver a total of just 3.6 million vehicles in China, representing an annual increase of around 10 percent that is below last year's 16-percent growth.
The VW China chief said that they have plans to step up investment in manufacturing so that production capacity is no longer an impediment to growth and meeting the demand.
He said: "There is still potential in China's passenger car market, especially in tier three, four or five cities."
Back in 2013, the company laid down a plan to invest 18.2 billion euros ($22.8 billion) from 2014 to 2018 to increase annual production capacity to around 4 million vehicles. Heizmann said that investment plan was formulated on the assumption that average annual sales growth would be at around 5 percent.
That, on hindsight, was "a very conservative planning base," said Heizmann. "This is why we have a lack of capacity. We're clearly going beyond this 4 million issue."
Aside from raising its investment in manufacturing to increase production capacity, Volkswagen will also significantly extend its product portfolio to better compete with General Motors (GM.N) for the top spot in China, added Heizmann. He said that they are also aiming to launch "more than 20 electric or plug-in hybrid models in China by 2018."
Currently, the company is "making very good progress" toward launching a budget car in China and is developing a China-only luxury sedan "to show the customers that the Volkswagen brand is not just a volume brand in China."
The VW China chief also confirmed that that there are still plans to raise Volkswagen's current 40-percent stake in its joint venture with Chinese partner FAW Group Corp.
However, he added: "This is a process which is not just done in weeks." After more than a year of talks, Volkswagen still has not been able to increase its stake in the joint venture to about 50 percent, said Reuters.
