VW in China (2): mid-term sales/model plans and development structure

VW to introduce 26 new models by 2015 with sales of 4 million a year by 2018

2011/10/05

Summary
Development structure: VW jointly develops with Shanghai VW next-generation new models while FAW-VW enhances an independent development structure
Model plan: A total of 26 new models - 18 by FAW-VW and 8 by Shanghai VW - are to be launched
Other: Audi plans to establish a new exclusive joint sales company while it enters the used car business

Summary

In 2011, VW estimates the sales of more than 2.2 million vehicles in China. The company targets the sales of 4 million a year by 2018. In order to achieve this target, it will invest about 4.6 billion Euros during the five years through 2015, planning to introduce 7 fully-remodeled models and 19 models that it will newly start producing in China.

In addition, Shanghai VW and FAW-VW each aims to launch a first passenger car under its own brand between 2013 and 2014. Shanghai VW will implement this through joint development of a next-generation new model with VW, and FAW-VW by enhancing development functions including expansion of its own development center.

The following reports VW's recent activities in China on its medium-term sales plant, development structure, and model plan.

Concerning VW's recent activities in China on the latest medium-term operation plan and the expansion of production of vehicles and engines, we report in the market report, "VW in China (1): plans to increase engine and vehicle production capacity" in September 2011.

VW Group's sales plan in China (-2018)

Investment plan for launching new model/expansion of production capacity		The company will make an additional investment of 10.6 billion Euros in China during the five years from 2011 to 2015 (of which, 6 billion Euros in expanding annual production capacity and 4.6 billion Euros in launching new models and other activities). The net profit of its joint venture companies in China will be used for the investment.
Sales target *Note 1	More than 2.2 million in 2011. More than 3 million in the medium run (2013-2014). 4 million by 2018.
		Each company's plan is as follows: * Shanghai VW (VW/Skoda brand): 1.2 million in 2011. More than 1.3 million in 2012. 2 million in 2015. * FAW-VW (VW, Audi and others brands): 1 million in 2011 (including 300,000 under Audi brand). 1.65 million in 2015 (including more than 1 million under VW brand. More than 600,000 under Audi brand)
		* To expand sales in midsize and small cities and surrounding areas. * To increase marketshare of VW/Skoda/Audi vehicles in the South region (*Note 2) to the level of national average.
Environmental responsiveness	Effort to improve fuel economy/ to reduce emissions	For the time being, the company is to improve fuel economy and to reduce emissions by promoting the downsizing of engines to be used and the expansion of powertrain installation that combines TSI high-performance engine and DSG (dual-clutch version) transmissions.
	Efforts on eco cars	VW Group's efforts: * The company will gradually introduce models with an idle reduction system/regenerative braking system, HEVs/PHEVs, and EVs; thus, expanding the business for eco cars. It will use an idle reduction system and a regenerative braking system as standard equipment in all models to be marketed in China by the end of 2015. * The company promotes modularization of HEVs/EVs, aiming to be a leading company in the EV market in China in 2018. Local production of EVs will begin in 2013-2014. Sales target for 2018 is 100,000.
		Audi's plan is as follows: * The company will start to use an idle reduction system and a regenerative braking system in all models to be marketed in China as standard equipment in 2012. * The company will introduce two full-hybrid passenger cars (the New A6L hybrid and the Q5 2.0T hybrid) in 2013 or later. * The company will launch an EV model in 2015 or later.
		At the Shanghai Motor Show 2011, Skoda announced that it would start local production of HEVs/EVs in the near future as its parent company, VW, does.

Source: VW's strategy for electric vehicles in China (Apr. 23, 2010), Automotive News Europe (Apr. 25, 2011), other various media reports in 2011.
*Note 1. Sales target is estimated by MarkLines based on various media reports.
*Note 2. "South region" includes Zhejiang Prov., Jiangxi Prov., Fujian Prov., Guangdong Prov., Guangxi Prov., and Hainan Prov.

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