VW aims bigger in China

Volkswagen Group (VW) said it planned to double its dealers across China in the next three years and enrich its product portfolio in China. But analysts warned Tuesday that the news may cause current dealers to be concerned about profit competition.

"Having new dealers in a local market may dilute the profits of the current ones, especially if the market is already saturated," Zeng Zhiling, an auto industry analyst with Shanghai-based research firm JD Power, told the Global Times Tuesday.

German automotive producer Volks-wagen Group announced Monday a plan to expand its sales network to some 3,000 dealers in China by the end of 2015, China's largest automotive B2B marketplace gasgoo.com reported Tuesday.

Volkswagen had some 1,590 dealers in China, its largest market, by the end of 2011.

The automaker also said it would offer a total of 76 models to Chinese consumers by 2015, including 33 completely locally manufactured and 43 imported models.

"The expansion of VW's sales network corresponds to its efforts to increase its production capacity over the past two years," said Zeng.

The German automotive giant built new plants in cities like Foshan of Guangdong Province and Yizheng of Jiangsu Province starting last year, with each plant expected to turn out 300,000 cars annually.

But higher production capacity does not necessarily mean more willing investors in building new shops, the analyst warned.

"Land-use costs are climbing and margins for running self-owned shops are falling amid the auto market slowdown," Zeng noted.

Volkswagen surpassed Toyota Motor Corp in sales volume in 2011, second only to General Motors Corp worldwide, which analysts said is thanks to its strong performance in China. Volkswagen sold some 2 million cars over the past three quarters in China, up 18.5 percent year-on-year, according to its financial report.

And Volkswagen's market share for the first three quarters climbed to 21 percent, 1.9 percentage points year-on-year growth, beating rivals General Motors and Hyundai Motor Group, which seized 10 and 9 percent market shares respectively.

Zeng said it is still hard to tell whether Volkswagen can increase its advantage, as its rivals may also expand their sales networks. General Motors, for instance, announced in April it will have some 600 more dealers in China by the end of 2012.

However, others said Volkswagen can keep beating its opponents.

"Unlike General Motors, which entered China in 1997, Volkswagen has been in China for some three decades and many of its products, like Santana and Jetta, have become widely known," Su Hui, a senior marketing expert at China Automobile Dealers Association, told the Global Times Tuesday.

Besides, China and Germany are on good terms. "The Chinese don't have the same dislike for German products as they do for Japanese ones, for historical reasons," Su said, noting that the next few years should see a stable Volkswagen sales volume.

Hyundai Motor saw its sales in China climb 37 percent in October as the South Korean automaker seized some of the market share lost by its Japanese counterparts as a result of worsened Sino-Japan ties.