Volkswagen steps up southern China push with Guangdong expansion

Wed Sep 25, 2013 2:23am EDT
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By Samuel Shen and Norihiko Shirouzu

FOSHAN, China (Reuters) - Volkswagen AG (VOWG_p.DE: Quote) is expected to announce plans as early as Wednesday to significantly boost the capacity of a key plant in southern China as Europe's No.1 carmaker ramps up efforts to grab more market share in a region dominated by Japanese rivals.

On Wednesday, Volkswagen will officially open a plant in Foshan city in southern Guangdong province which it operates under a venture with state-owned automotive enterprise FAW Group Corp (000800.SZ: Quote). The plant, capable of producing 300,000 vehicles a year, recently started to manufacture the redesigned Volkswagen Golf car.

Volkswagen, which also sells the Audi, Skoda, Lamborghini and Bentley brands in China, is expected to unveil on Wednesday details of a plan to double the capacity of the Foshan plant, sources familiar with the matter told Reuters. The plant is also slated to start producing the Audi A3 hatchback in early 2014, the sources said.

The planned expansion stems from an agreement signed in May by the two companies, which aim to boost the plant's capacity to 600,000 vehicles a year with an investment of 15.3 billion yuan ($2.50 billion).

Officials at Volkwagen and FAW were not immediately available to comment.

Volkswagen has deepened its presence in the region since launching an initiative dubbed the "South China Strategy" in 2009, through which the carmaker has also increased the number of retail stores in the area. Its efforts have focused on Guangdong, a large auto-buying province where the influence of Japanese carmakers is the strongest in China.

In a sign that Volkswagen's efforts are paying off, the market share of the Volkswagen brand, excluding the Audi, Skoda, Lamborghini and Bentley brands that the company also markets, climbed to 13.6 percent in southern China in the first half of this year from 11.9 percent a year earlier, according to consulting firm LMC Automotive.

By contrast, Japanese brands - including Toyota Motor Corp (7203.T: Quote), Honda Motor Co Ltd (7267.T: Quote) and Nissan Motor Co Ltd (7201.T: Quote) - have seen their combined market share shrink to 23.9 percent from 29.8 percent during the same period.   Continued...

A Volkswagen logo is seen on the front of a Volkswagen vehicle at a dealership in Carlsbad, California, April 29, 2013. REUTERS/Mike Blake