VW China to announce new Guangdong plant

　　Winfried Vahland, president of Volkswagen China Group declared publicly that VW will launch its fifth plant in south China and plans to make an official announcement at Beijing Motor Show, which will kick off next month.

　　However, Guangdong authorities said to Nanfang Daily newspaper, it’s still undetermined whether VW will establish a new plant in Guangdong. According to the same person, the project is under negotiation and some details are yet to be finalized; besides VW hasn’t hold any board meeting to settle it down.

　　After reporters’ verification, it’s quite probable that VW will set up new plant in Guangdong instead of its local partners, such as FAW Group and SAIC Motor Co Ltd.

　　According to sources, the project has been launched for more than six months, firstly undergoing early stage of evaluation conducted by Mckinsey Company. A group of 40 people from VW has arrived at Guangdong and carried out a feasibility study report this February.

　　The production capacity of new plant is projected to reach 600,000 units, divided into two phases including producing 300,000 units of middle- and high-end vehicles in the first phase.

　　News analysis

　　How many obstacles VW has to overcome if it will launch a new plant in Guangdong?

　　Analysts said Guangdong will be a perfect spot for VW to occupy southern market. If the fifth plant finally settles down in Guangdong, it will be another major project involving foreign investment for Guangdong province.

　　How to solve the issue of vehicle products catalog?

　　According to disclosure, vehicle products catalog is mainly causing VW bottlenecks in establishing new plant in Guangdong, due to government’s no more increase in such catalog. However, in compliance with state policies that merger and restructuring is first step for enterprises to expand their production capacity, VW have to make use of a reverse takeover to figure out the problems in establishing a new plant in Guangdong.

　　At present, there are several shell companies in Guangdong, such as Guangzhou Baolong Motor, Dongguan automobile industry park, and the initial Shuande VW, including Zengcheng, Foshan,Shunde, Dongguan, Zhanjiang and some other cities in Guangdong province. According to an anonymous source with knowledge of the project, although the location has yet to be decided, it’s expected that Zengcheng obtain the most chance to stand out, due to the negotiation over equity stake between VW and the original shareholders in Zengcheng VW.

　　Some experts on vehicles said, it's not a problem for VW to borrow shell companies under such powerful background in China. Reporters also knew that An tiecheng, general manager of VW had conducted on-site visit to some preferred sites in Guangdong province by helicopter during his research this February. In addition, after two sessions, an observation group involving VW several middle-level cadres has been conducting an on-site investigation in Guangdong for this week.

　　How to occupy the market where Japanese vehicles have long prevailed?

　　Since VW is one of earliest automakers entering China, its classic vehicle models with its two local partners have swept the whole domestic market, once occupying half of market share in China. It now has plants in four cities, including Shanghai, Changchun, Chengdu, and Nanjing, while there is no production facility in south china where sales reach 30%. Japanese brand vehicles have long prevailed in south China so that it’s no easy for VW to access to southern market.

　　As a matter of fact, southern market is the most vigorously consuming market with fast growth. If it will be VW’s lost market, it’s unimaginable for the future of VW China and its market share expansion. Under such background, VW has long been waiting for opportunity to occupy southern market.

　　Could the plan of taping southern market improve VW strategic layout?

　　According to Su weiming, vice president, who is in charge of VW market, the company expects to raise the contribution rate in the region between 12% and 15%, and its regional market share will rise to 20% till 2012. Even if it’s calculated in accordance with conservative growth, the sales volume of southern market will double, even quadruple the current sales in 2012.

　　Actually, the establishment of Guangdong plant will not only make VW accessible to south market, but also improve it’s layout with certain significance by stringing the north, center with the south in VW’s strategic layout map.

　　Furthermore, the new Guangdong plant will provide a platform for the development of all domestic joint venture automakers. Therefore, the significance of the new plant is far beyond south China invasion. Zhongshi, analyst said automaker giants have seen the future of China market in automakers’ healthy development in Guangdong.

　　News background

　　VW south China strategy

　　VW China has released its 2018 south China strategy in November, 2009. According to the strategy, the company expects to raise the annual sales volume from the current 150,000 units to 500,000 units in southern market, focusing on Zhejiang, Jiangxi, Fujian, Guangdong, Hainan and the Guangxi Zhuang autonomous region. Meanwhile, it will increase the southern market share from 12% in previous year to the average level of those common brands in China.

　　To coordinate with the implementation of the strategy, VW China proclaimed a declaration, elaborating on its plan in the next three years: VW will invest 4 billion Euros for capacity expansion and products updating in Nanjing and Chengdu plants, and plans to launch some 20 new and updated models. According to Winfried Vahland, the original plan is to invest 4 billion Euros, but now the investment scale should be expanded.

　　Before that, he has particularly mentioned the appealing of south market. He said VW will launch 10 models to the market in 2009 and 2010, including VW GTI and VW CC and some other individualized models. “It will bring more vigor and passion for VW brands, and it's much more appealing for consumers in south China.”

　　Lang xuehong, General Manager of Sinotrust Automotive Marketing Solutions expressed, in compliance with VW China’s ultimate goal, the strategic node of south China not only lies in 2018, but also depends on its expansion in market share for long term. She also said the brisk sales and active expansion in capacity showed that VW gained great confidence over China market. (Translator: Qinghua/serena)

　　See original Chinese report please clicks:

　　http://auto.sohu.com/20100317/n270882347.shtml