BEIJING - German
automaker Volkswagen is pledging to launch
numerous new models in China and massively cut
costs there within the next four years, aiming to
restore profitability and prevent its share of the
world's No 3 auto market from sliding further.
The firm plans to produce 10 to 12 new
models at its two joint ventures in China before
2009. The plan is part of a so-called "Olympic
Program", said Winfried Vahland, Volkswagen's
global vice-president, at an October 17 press
conference in Beijing. The first new
model will be launched at the beginning of next
month, said Vahland, also chief executive officer
of Volkswagen Group China.
The company
also expects to cut costs in China by 40% by 2008,
Vahland said. Cost-cutting methods will include
increasing
the
local content of made-in-China vehicles, slashing
local sourcing expenses and unifying the sourcing
of its two joint ventures. Volkswagen, which runs
two car ventures, with China's Shanghai Automotive
Industry Corporation (SAIC) and First Automotive
Works Corporation (FAW) in Beijing, has been the
market leader in China since it started local
production in the 1980s.
However, its
market share has tumbled to less than 20%
recently, from above 50% in 2000, due to growing
competition from US and Asian rivals after the
nation's entry into the World Trade Organization
(WTO) in 2001. Volkswagen's China operations will
break even or could be in the red this year,
Vahland said. "We aim to regain profitability in
China next year," he said. Last year, the group's
two car ventures in China reported 222 million
euros (US$266 million) in operating profits.
Volkswagen sold 265,000 autos in China in
the first half of this year, Vahland said. The
firm aims to sell even more autos in the second
half of 2005. "We underestimated China's WTO
accession's impact on our businesses in the past.
By implementing the 'Olympic Program', we aim to
be the most attractive car producer and market
leader in China amid fierce competition," Vahland
said. The group has halted the expansion of auto
production capacity in China to cut costs, but
will continue to invest in the local development
of spare parts, he said.
Both of
Volkswagen's joint ventures now have an annual
production capacity of 450,000 autos. The group
announced in 2003 that it planned to double its
total production capacity in China to 1.6 million
a year by 2008.
"We will further
differentiate the market positioning of products
at our two joint ventures in China," Vahland said.
Products of Volkswagen's venture with FAW will
target "modern elites" in China, while those of
the venture with SAIC will mainly focus on
"classical elites", he said. Cars from Skoda,
Volkswagen's Czech brand - to be brought into the
venture with SAIC in 2007 - will target "smart
buyers" in China, he added.
The venture
with FAW in northeast China now makes the
Volkswagen Jetta, Bora and Golf as well as the
Audi A4 and A6. The venture with SAIC produces the
Volkswagen Santana, Santana 3000, Gol (a supermini
also produced in Latin America), Passat and
Touran. "We will also help our two ventures to
develop Chinese-branded cars, if they are willing
to do so, and if there is market demand," Vahland
said.
