VW mulls bigger stake in JV

Volkswagen offers 80 models in China, 20 of which are domestically produced. Huang Jiexian/For China Daily

German firm is in talks with China's FAW

Germany-based auto conglomerate Volkswagen AG may take a larger stake in its Chinese joint venture with local partner FAW Group Corp, the head of VW in China said.

"We are now in very good discussions with our Chinese partner FAW on further cooperation for our joint venture, FAW Volkswagen Automotive Co Ltd, possibly in the equity area," said Jochem Heizmann, board member of Volkswagen and president and chief executive officer of Volkswagen Group China.

"We have had a very long and successful cooperation with FAW in the past 20 years. As the previous contract for FAW Volkswagen is going to expire in 2016, both sides expect to extend the partnership another 20 years or more," he said.

Volkswagen Chief Executive Officer Martin Winterkorn earlier this month told German media at the Frankfurt auto show that the company was negotiating with FAW to increase its stake in the joint venture from the current 40 percent to 50 percent.

However, Heizmann declined to disclose further details about any stake increase, saying: "Volkswagen hopes to have more shares in this joint venture."

Volkswagen also runs a 50-50 joint venture in China with Shanghai-based SAIC Group.

Heizmann told China Daily that talks on the extended contract also included strategic cooperation in more and different fields, including new product introduction, used cars and financing.

Volkswagen offers 80 models in China, 20 of which are domestically produced.

"By 2015, we will expand our local product portfolio to 91 models in our second home, with 30 produced here in China," said Heizmann. "The increasing local production proportion also indicates that Volkswagen has made China one of its most important markets."

The German automaker on Wednesday announced the opening of a new factory in Foshan, Guangdong province, under the joint venture FAW Volkswagen, along with the start of production for the first model, the new Golf.

"Volkswagen Group was the first automaker to establish local production in China in 1983, and it is today pioneering new development with our 'Go South' strategy in Foshan, as well as in Chengdu and Urumqi through the 'Go West' strategy," said Heizmann.

"Now we're successfully positioning Volkswagen production in all regions in China."

The FAW-Volkswagen plant, with a total investment of 13 billion yuan ($2.1 billion). will initially produce 300,000 cars a year. Capacity will double in the second phase, which will open by 2017.

Juergen Unser, vice-president of FAW Volkswagen, said that the Foshan plant is designed to produce six models under the Volkswagen and Audi brands.

He also said that in the first eight months of this year, FAW Volkswagen's sales exceeded 1 million units in China, with 700,000 units under the Volkswagen brand and 300,000 bearing the Audi brand. The sales milestone was reached two months earlier than last year.

Though growth in China's automobile market has slowed from more than 30 percent in 2009 and 2010 to single-digit levels this year, the country is still a major investment destination for international automakers.

According to PricewaterhouseCoopers' 16th Annual Global CEO Survey Automotive Summary, China tops the list of countries where vehicle executives expect business to grow this year.

German vehicle manufacturer Daimler AG said last month that it is investing 2 billion euros ($2.7 billion) in its local joint venture with China's BAIC Motor Group in Beijing, with plans to more than double annual capacity to 200,000 units by 2015.