VW in China (1): plans to increase engine and vehicle production capacity

Capable of producing 4 million units annually by 2018 with plant expansion and new construction

2011/09/13

Summary

 Under its medium-term plan, Strategy 2018, VW is targeting the sales of 10 million a year. The company plans to produce more than 4 million of them, or 40%, in the largest Chinese market, investing 10.6 billion Euros in its business in China during the five years from 2011 to 2015.

 Concerning production, the company will boost the production capacity of its existing plants, the Chengdu plant of FAW-VW and the Nanjing plant of Shanghai VW, while FAW-VW and Shanghai VW also plan to start operations of a new plant in Guangdong province and in Jiangsu province, respectively. Shanghai VW is also planning to construct a new plant in Xinjiang (Xinjiang Uygur Autonomous Region) or in Zhejiang province as a candidate site in 2013 or later.

 With regard to new models, VW will aggressively introduce HEVs/EVs, aiming to be a leading company in the EV market in China in 2018.


 The following reports VW's recent activities in China on the latest medium-term business plan and the expansion of production of vehicles and engines.

 In addition, concerning VW's medium-term sales operation plan, development structure, model plan, and sales structure in China, we report in the auto industry report, "VW in China (2): medium-term sales operation plan, development structures, and model plan" to be issued in September 2011.

VW Group's production plan in China (-2015)

Investment plan for expansion
of production capacity/
launching new models
 The company will make an additional investment of 10.6 billion Euros in the business 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.
Production
target
 2.2 million in 2011, 3 million in 2013-2014, and about 3.65 million in 2015.
* Shanghai VW (VW/Skoda brand): 1.2 million in 2011, more than 1.3 million in 2012, and 2 million in 2015
* FAW-VW (VW/Audi brand): 1 million in 2011 and about 1.65 million in 2015
Purchasing of parts  The company promotes local purchasing of parts to be used in VW/Skoda models made in China, targeting eventually at 100%.
Environmental
responsiveness
Efforts 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
* 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



VW accelerates enhancement of production capacity

 Under the 10-Year business plan to 2018 (Strategy 2018), which VW announced in February 2009, the company originally planned to have a production capacity of 3 million a year in China by 2018, but has moved up the schedule by five years to 2013 to prepare the production capacity for about 3 million. In addition, the company expects the production capacity to surpass 4 million in 2016 or later.

 

VW Group: Actual production volume and production capacity of joint venture plants in China

  Model Actual production volume
(unit)
Annual production Capacity
(1,000units)
2010 January
-June
2010
January
-June
2011
As of
August
2011
After expansion
(planned year)
FAW-VW Changchun
plant
VW, Audi
models
882,827 398,718 454,461 Over
780
Over 930 (2015)
Chengdu
plant
150 350 (September 2011)
→ 450 (March 2013)
→ 600 (medium-term plan)
Foshan plant VW, Audi,
SEAT,
Porsche,
Kaili models
(planning)
(started construction) - 300 (2013)
→ 600 (medium-term plan)
Total 882,827 398,718 454,461 Over
930
Over 1,130 (by the end of 2011)
→ over 1,530 (2013 or later)
→ over 1,650 (2015)
→ over 2,100 (medium-term plan)
Shanghai
VW
Anting plant,
Shanghai
VW, Skoda
models
1,017,249 519,534 626,733 approxi-
mately
800
n.a.
Nanjing plant 150 300 (2012)
Yizheng plant,
Jiangsu prov.
VW, Skoda
models
(started construction,
also called
Shanghai VW's 5th plant)
- 150 (at the end of 2012)
→ 300 (August 2013)
→ 600 (medium-term plan)
New plant VW, other
models
(Xinjiang or Zhejiang prov.
as possible sites,
under consideration)
- Over 300 (2014 or later)
total 1,017,249 519,534 626,733 Approxi-
mately
950
1,250 (at the end of 2012)
→1,400 (2013 or later)
→over 1,700 (2014 or later)
Grand total 1,900,076 918,252 1,081,194 1880 Over 2,080 (at the end of 2011)
→ over 2,380 (at the end of 2012)
→ over 2,930 (2013 or later)
→ over 3,230 (2014 or later)
→ over 3,350 (2015)
→ over 3,800 (medium-term plan)

(Note) Press releases of Shanghai VW, FAW-VW and VW China and various media reports

 

FAW-VW

Chengdu plant: production capacity will be increased to 450,000 a year in 2013 and further to 600,000 in the medium run
 In September 2011, the 2nd-stage construction of the Chengdu passenger car plant (Chengdu Economic & Technical Development Zone) will be completed. With this, production capacity will be increased from 150,000 in August 2011 to 350,000 a year.
 In addition, in July 2011, the company started a 3rd-stage construction of the plant. The 3rd-stage expansion work will be completed in March 2013 and production capacity will be boosted to 450,000 a year. The total investment in the 3rd-stage construction is worth 7.2 billion RMB, which includes the construction of stamping/welding/painting/assembly plant and a development center. The new plant will produce the New Jetta (Jetta NF) and a next-generation A-segment model with high-end specifications.
 Although details on the start time of construction are not made public, the company is said to be planning a 4th-stage construction in the future, eventually boosting production capacity to 600,000 passenger cars a year.

 

Production capacity of the EA211 engine will be boosted to 900,000 a year

* At the same time that the 3 rd-stage expansion work at FAW-VW's Chengdu passenger car plant began, the construction of an adjoining plant for the EA211 engine also started. Production capacity is 450,000 in the 1st-stage construction (total investment is worth about 2.8 billion RMB), which will be boosted to 600,000 in the 2nd-stage construction. The construction of the engine plant is scheduled to be completed in March 2013.
* The joint venture engine plant in Shanghai (Shanghai Volkswagen Powertrain) plans to build production capacity of 300,000 of the EA211 engine (production capacity of 600,000 including other engines) a year through a 3rd-stage construction of the plant.
* With these moves, the combined production capacity of the two plants will increase to 900,000 of the EA211 engine a year.
 The EA211 engine is a center direct-injection turbo engine (that meets Euro 5 emission standards), which employs VW's Bluemotion Technology.

 

Production capacity of Audi vehicles is boosted to 700,000 a year by 2015
 In March 2011, the Changchun Audi plant boosted production capacity from 210,000 to 300,000 a year, which the company plans to increase to a further 450,000 by 2015.
 In the meantime, the Foshan plant will also build production capacity of 250,000 Audi vehicles a year. With this move, FAW-VW's production capacity of Audi vehicles will be boosted to 700,000 a year by 2015.
 FAW-VW halted production at the Changchun Audi plant from February to March 2011 in order to upgrade it. The production of the Audi Q5 and the Audi A4L is switched from the same production line to independent dedicated production lines. FAW-VW intends to make two existing plants in Changchun into special plants each for Audi vehicles and VW vehicles in the future.

 

The Foshan new plant starts operations in August 2013, building production capacity for 600,000 a year
 In February 2011, VW started the construction of the Foshan plant of FAW-VW in Foshan city (Shishan town, Nanhai District), Guangdong province, which is FAW-VW's Southern plant. The new plant is scheduled to start operations in August 2013.
 When operations start, the initial production capacity will be 300,000 a year (with more than 9000 employees), which is planned to increase to 600,000 through a 2nd-stage construction in the medium run.
 The 1st-stage construction includes the main production facilities such as stamping/welding/painting/assembly and a development center. The site area is 1.003 million square meters. The total investment in the plant is worth about 10.1 billion RMB (including about 3 billion RMB subsidy by the local government).
 In addition to VW/Audi vehicles, the Foshan plant is said to be eying to prepare production for SEAT vehicles in the future and Porsche in the medium run.

 

Shanghai VW

Shanghai VW's Nanjing plant boosts production capacity to 300,000 a year in 2012 through expansion work
 In June 2011, VW unveiled that it would carry out the expansion work of the Nanjing passenger car plant of Shanghai VW. The production capacity of the Nanjing plant will be increased from 150,000 in August 2011 to 300,000 in 2012.
 This construction includes new facilities such as body (welding) line/painting line/assembly line, etc. In line with this construction, the company will newly produce three models at the Nanjing plant in 2012.

 

Shanghai VW starts operations of the Yizheng new plant at the end of 2012, building production capacity of 600,000 a year
 In December 2010, Shanghai VW began the construction of the Yizheng plant (Jiangsu prov. branch plant). The new plant will start operations at the end of 2012.
 The total investment in the new plant is worth about 800 million Euros. The site area is 1 million square meters. The initial production capacity will be 150,000 a year when operation starts. The capacity will be increased to 300,000 in 2013 or later. The new plant will introduce flexible production, producing new passenger cars (including Skoda Yeti) that employ advanced technology and that are designed for the market in China.
 Shanghai VW's Yizheng plant plans to boost production capacity to 600,000 a year in the future through a 2nd-stage construction.

 

Shanghai VW: constructs a new plant with production capacity of 300,000 a year with Xinjiang/ Cixi of Zhejiang province as likely candidate locations
 Following the construction of the Yizheng plant of Jiangsu province, Shanghai VW is currently considering building a new plant with Urumqi of Xinjiang or Cixi of Zhenjiang province (on the northeast of Ningbo city) as candidate locations. Recently, one of the VW's executives announced an intention to strengthen the expansion of business into the western part of China in line with the Chinese government's policy to promote the large-scale development of the northwestern part of the country. It is considered most likely that the Xinjiang plant will be constructed. The production capacity of a new plant is said to be more than 300,000 a year and to start operations as early as in 2013.
 In May 2011, the vice-chairman of VW's Chinese headquarters had an on-site inspection tour on the investment in the construction of a plant in Xinjiang with an inspection team led by the head of the Chinese government's Industry Harmonization Department of National Development and Reform Commission.
 Concerning the construction of a plant in Xinjiang, securing local human resources and purchasing of parts remain a challenge.
 In the meantime, in May and June, 2011, Shanghai VW made a successful bid for a right to use state-owned land in Cixi (Zhejiang prov.) for 50 years, which is regarded as a plant site (site area: 1.876 million square meters) and a logistics and warehouse site for materials and products (site area: 755,000 square meters). However, it is reported that the government (National Development & Reform Commission) indicated its intention to deny a permit application for the construction of the Ningbo plant and requested that a plant be built in Xinjiang in line with the Chinese government's policy to promote the large-scale development in the northwestern part of China.

 

 

(Reference)

VW Group's production of each model by joint venture companies in China (2007-June 2011)

(units)
Model 2007 2008 2009 2010 January
-June 2010
January
-June 2011
Jetta 209,867 195,912 229,367 228,005 106,094 107,600
Bora 62,218 39,253 2 - - -
Sagitar 1.4T - - 10,939 51,355 26,111 22,577
Sagitar 1.6L 53,132 57,079 73,517 56,290 26,902 33,244
Sagitar 1.8T 7,032 3,053 5,037 5,250 2,994 1,815
Sagitar 2.0L 17,459 14,093 9,389 - - -
Golf (former model) 4,399 2,713 1,400 - - -
Magotan 1.4T - - 596 14,476 7,073 15,345
Magotan 1.8T 31,755 40,021 48,874 52,081 27,222 14,162
Magotan 2.0L 3,340 8,825 - - - -
Magotan 2.0T - 181 14,464 12,862 6,262 4,778
Magotan 3.0T - - - - - 1,053
New Bora 1.4T - - 25 26,307 4,612 14,742
New Bora 1.6L - 12,771 122,448 147,457 67,160 73,001
New Bora 2.0T - 3,520 6,250 1,146 1,146 -
Golf A6 1.4T - - 4,357 34,017 15,909 20,793
Golf A6 1.6L - - 1,803 21,296 8,776 18,661
Golf A6 2.0T - - 55 3,825 1,745 2,037
CC 1.8T - - - 27 0 7,017
CC 2.0T - - - 17,951 1,416 10,723
Caddy 1.6/1.8L 645 22 - - - -
Audi A41.8T, 2.4/3.0L 20,541 17,952 - - - -
Audi A4L 1.8T - - 3,614 4,313 1,788 2,217
Audi A4L 2.0T - - 37,205 56,232 24,665 32,822
Audi A4L 3.0L - - 199 52 33 -
Audi A6L 2.0T 33,445 31,818 39,246 47,614 24,170 26,110
Audi A6L 2.4L 36,676 36,698 47,356 50,156 25,266 17,565
Audi A6L 2.8L - 11,466 10,263 11,212 5,246 5,166
Audi A6L 3.2L 8,018 4,458 - - - -
Audi A6L 3.0L 1,036 698 2,310 4,283 2,421 1,858
Audi A6L 4.2L 258 289 - - - -
Audi A6L 2.7L - - 2,051 2,703 1,892 9
Audi Q5 - - - 33,917 9,815 21,166
Total (FAW-VW) 489,821 480,822 670,767 882,827 398,718 454,461
Santana Vista - - 92,893 114,946 47,787 65,773
Santana 3000 97,244 94,244 - - - -
Santana 1.8L 103,262 106,428 107,390 98,885 42,990 56,895
SantanaWagon 1.9L 3,450 1,500 - - - -
Passat 1.8T 5,532 5,782 845 - 49,671 33,419
Passat 2.0L 5,670 5,015 886 - 17,391 12,651
Passat 2.8L - - - - 618 222
Polo 1.4/1.6L 370 - - - - -
Polo Jinqing 1.4L 42,268 32,936 42,517 32,210 14,473 -
Polo Jinqing 1.6L 14,781 7,983 22,763 33,633 14,738 -
Polo Jinqu 1.4L 26,570 19,845 31,414 24,970 9,650 19,160
Polo Jinqu 1.6L 9,658 5,445 7,794 16,138 6,784 4,634
New Polo Jinqing 1.4L - - - 4,054 - 33,424
New Polo Jinqing 1.6L - - - 4,244 - 24,675
Gol 2/4door - 1 - - - -
Cross Polo - 7,325 6,993 12,062 4,953 -
Passat GP 1.8T 81,912 75,084 73,152 91,062 49,671 33,419
Passat GP 2.0T 24,460 15,935 32,955 39,950 17,391 12,651
Passat GP 2.8T 2,368 1,454 1,815 1,374 618 222
New Passat 1.4T - - - - - 507
New Passat 1.8T - - - - - 10,751
New Passat 2.0T - - - - - 5,578
Touran 2011 1.4T - - - 2,395 - 12,185
Touran 1.8T 5,199 8,363 8,817 7,429 4,025 0
Touran 2.0L 4,855 4,085 10,462 12,508 8,763 350
Tiguan 2WD 1.8L - - 9 25,152 6,099 22,107
Tiguan 4WD 1.8L - - 7 24,563 8,817 19,209
Tiguan 4WD 2.0L - - 16 23,035 7,580 19,759
Lavida 1.4T - - 434 28,960 4,862 20,993
Lavida 1.6L - 38,036 119,064 191,365 94,043 97,136
Lavida 2.0L - 8,957 24,701 31,611 20,810 13,779
Octavia 1.4T - - - 20,110 4,130 10,207
Octavia 1.6L 14,577 35,283 64,635 77,110 34,743 39,114
Octavia 1.8T 11,665 10,432 10,111 6,053 3,887 2,154
Octavia 2.0L 12,298 9,156 8,330 8,787 5,647 8,346
Octavia 2.0T - - - 1,798 - 426
Fabia 1.4L - 507 19,489 26,962 12,545 14,484
Fabia 1.6L - 382 11,767 16,236 7,520 9,802
Superb 1.4T - - - 5,757 1,701 5,083
Superb 1.8T - - 12,388 30,074 15,195 16,076
Superb 2.0T - - 4,913 3,816 2,432 1,542
Total (Shanghai VW) 466,139 494,178 716,560 1,017,249 519,534 626,733
Grand Total 955,960 975,000 1,387,327 1,900,076 918,252 1,081,194
(Note) 1. As for Model, "Sagitar 1.4T" means "a model with a 1.4-liter turbo engine." "Sagitar 1.6L" means "a model with a 1.6-liter engine without turbo." The same applies for the following.
2. As for Model, "Audi A4L 1.8T" means a model designed for China of a longer-version Audi A4 with a 1.8L turbo engine.

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