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



 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): mid-term sales/model plans and development structure" 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.
 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%.
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
 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

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