German automaker Volkswagen expects to streamline service networks of its two car joint ventures in China, the world's fastest-growing auto market.

"It is very necessary for our two ventures to share resources in service networks," said Zhang Suixin, executive vice-president of Volkswagen China Group.

"Both ventures now have huge service networks in China. It's redundant," Zhang told China Daily.

He made the remarks during the three-day Shanghai International Trade Fair for Automotive Parts, Equipment and Services Suppliers, which ended on Saturday.

Volkswagen's two ventures, with Shanghai Automotive Industry Corp (SAIC) and First Automotive Works Corp (FAW), now have a total of more than 1,000 service stations in China.

"The two ventures are also studying how to share resources in other areas (sourcing and sale)," Zhang added.

These expected measures are seen as part of Volkswagen's efforts to cut costs in China.

Volkswagen, the biggest foreign carmaker in China, faces great pressures from shrinking market shares and high costs.

Earlier this year, Volkswagen said that its ventures in China will slash costs by 410 million euros (US$546 million) before the end of 2005.

However, no substantial steps have been taken so far towards the integration between the two ventures mainly because of resistance from FAW and SAIC, the top two Chinese automakers.

Volkswagen may find it difficult to reach its previous sales target in China of 800,000 cars this year due to growth decline of China's overall auto market, Zhang said.

Last year, the company sold 697,000 cars in China.

Volkswagen rolled out its vacuum suction-jet device for surface processing, Phaeton training chassis and electric service information system during the auto parts trade fair in Shanghai with participation of over 230 exhibitors from 26 countries and regions.

"Competition will not be confined to prices in China's auto market. Services will play a key role in determining brand image and market position with competition growing and customers becoming maturer," he said.

"You could not sell your cars to customers without a perfect service system in China," he said.

Automobile prices in China have been decreasing sharply in the last three years.

Almost all the automakers have slashed the prices of their vehicles this year.

Analysts forecast average prices will decline by 15 percent this year.

Vehicle sales in China grew by 17.6 percent year-on-year to 4.13 million units during the first 10 months of this year.

The growth rate was down from 34 percent last year.

(China Daily December 4, 2004)