Volkswagen Expanding Production in China

FOSHAN, China — Volkswagen plans to double production capacity at a newly opened factory in the southern Chinese city of Foshan, its chief executive for China said on Wednesday.

Volkswagen, the top European carmaker, is attempting to grab more market share in a region dominated by Japanese rivals.

VW officially opened the plant in southern Guangdong Province, which it operates under a venture with the state-owned FAW Group. The plant, capable of producing 300,000 vehicles a year, recently started to make the redesigned Volkswagen Golf.

VW, one of the first global automakers to establish car production facilities in China during the 1980s, is today shifting its operations in the country.

“Foshan is part of our ‘Go South’ strategy,” Jochem Heizmann, the company’s chief for China, said Wednesday in Foshan. “Two years ago we launched our ‘Go West’ strategy, building a plant in Chengdu,” and now VW is trying to repeat the feat through building a plant in Foshan and expanding it quickly. He also said that Volkswagen was in discussions with FAW to raise its stake in their joint venture to 50 percent from 40 percent.

“We’re discussing very intensively how to expand our strategic cooperation between VW and FAW on a long term,” Mr. Heizmann said. One subject in their discussions is “the possibility to increase our shares.”

The planned production expansion at Foshan stems from an agreement signed in May by the two companies that aims to raise the plant’s capacity to 600,000 vehicles a year with an investment of 15.3 billion renminbi, or $2.5 billion.

Volkswagen, which also sells the Audi, Skoda, Lamborghini and Bentley brands in China, is set to start producing the Audi A3 hatchback in early 2014 at the new plant, Mr. Heizmann said.

VW has deepened its presence in the region since the 2009 inauguration of the “Go South” strategy, through which it also increased the number of retail dealerships in the area. Its efforts have focused on Guangdong, a large auto- buying province where the influence of Japanese carmakers is the strongest in China.

In a sign that Volkswagen’s efforts are paying off, the market share of the Volkswagen brand, excluding the Audi, Skoda, Lamborghini and Bentley brands that the company also markets, climbed to 13.6 percent in southern China in the first half of this year from 11.9 percent a year earlier, according to the consulting firm LMC Automotive.

By contrast, Japanese brands — including Toyota Motor, Honda Motor and Nissan Motor — have experienced a decline of their combined market share to 23.9 percent from 29.8 percent during the period.

The expansion in southern China is part of Volkswagen’s plan to increase the group’s annual manufacturing capacity in the country to four million vehicles by 2018. VW increased its Chinese sales 18.5 percent last year, to 2.6 million vehicles.