German auto giant Volkswagen is to build an engine joint venture plant in the port city in Liaoning Province with partner First Automotive Works Corp (FAW), China's top vehicle producer.

The joint venture, with a total investment of 150 million euros (US$189 million), will start operations at the beginning of 2007, Volkswagen said in a statement yesterday.

The venture's annual production capacity will stand at 150,000 engines initially and could be expanded to 300,000 units.

Volkswagen and FAW control a 60 and 40 per cent stake in the engine venture respectively.

"The engine venture is part of Volkswagen's plans to speed up input in new technology and production capacity in China with local partners," said Folker Weissgerber, a Volkswagen Group board member, yesterday at a ground-breaking ceremony in Dalian.

The plant is part of Volkswagen's drive to increase the amount of locally-made components in its cars made in China, Weissgerber said.

"China is and will continue to be the most important market of Volkswagen outside Germany," he said.

Volkswagen sold almost 650,000 cars in China last year.

The engine venture will supply Volkswagen's joint ventures with FAW and Shanghai Automotive Industry Corp (SAIC).

The venture in Dalian, which will produce 1.8 and 2.0 litre engines, will also export to international markets.

Volkswagen's car venture with FAW, in Northeast China's Jilin Province, produces the Jetta, Bora and Golf, and Audi A6 and A4.

Its venture with SAIC in Shanghai makes Santana, Passat, Polo and Gol vehicles.

Volkswagen and SAIC also have an engine joint venture in Shanghai with an annual production capacity of 150,000 units.

(China Daily May 27, 2005)