February 16, 2016 / 4:23 AM / 2 years ago

VW says China sales may rise in line with auto market, explores new tie-up: executive

Guests stand next to a Volkswagen logo at the stage of the company at the 16th Shanghai International Automobile Industry Exhibition in Shanghai, in this April 20, 2015 file picture. REUTERS/Aly Song/Files

BEIJING (Reuters) - Volkswagen AG (VOWG_p.DE) expects its China sales may rise in line with the overall auto market this year, as it explores potential cooperation with domestic firm JAC Motors (600418.SS) in what could be a third partnership with Chinese automakers.

The head of the German firm’s China business, Jochem Heizmann, told reporters in Beijing that he expected China’s total passenger car market will expand in line with, or perhaps even exceed, gross domestic product growth in the world’s second-largest economy.

“If we look to the general growth situation, it’s still tremendous, big growth,” Heizmann said, adding that there is potential for expansion in China’s lower-tier cities despite the country’s economy registering its weakest growth in a quarter century.

“These are still cities with millions of inhabitants but in a different development stage,” Heizmann said. The executive said VW will stick to existing investment plans for China, investing more than 4 billion euros ($4.46 billion) annually for the coming years.

VW’s global business has come under increased scrutiny since it admitted last September it misled U.S. regulators about vehicle emissions. Sales in China, a stable source of revenue for VW for years and the carmaker’s biggest market, fell 3.4 percent in 2015 before rebounding in January.

U.S. rival General Motors Co’s (GM.N) vehicle sales in China rose 5.2 percent last year, allowing it to overtake VW to claim the number one spot in the world’s largest car market.

While confident in VW’s existing operations in China, including two tie-ups with domestic automakers, Heizmann said VW is now in early talks with JAC Motors (600418.SS) about the potential for cooperation between the pair.

Asked whether cooperation with JAC Motors could involve electric vehicles, actively being promoted by China’s government as a solution to chronic pollution in the country’s large cities, Heizmann said, “We have started talking about potential for cooperation, but no more detailed plans at present.”

JAC Motors, based in Hefei city, in the central province of Anhui, is one of China’s smaller automakers. VW’s existing joint ventures in the country are FAW-Volkswagen, a joint venture with FAW Car Co Ltd (000800.SZ), and Shanghai Volkswagen, a joint venture with SAIC Motor Corp Ltd (600104.SS).

Overall, Heizmann said, the German automaker plans to increase its Chinese workforce by a third, reaching 120,000 by 2019 from the current staff of 90,000.

($1 = 0.8969 euros)

Writing by Winni Zhou; Editing by Kenneth Maxwell

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