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Volkswagen Cautious Despite Fast Sales Growth
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German carmaker Volkswagen Group said yesterday its 2006 sales in China climbed by almost a quarter, but it made a conservative forecast on the growth of the world's No 2 vehicle market this year.

The group, which runs two car ventures in China, sold 711,298 vehicles in the nation last year, up 24.3 percent from 2005, it said.

Volkswagen Group's China chief Winfried Vahland said the group also achieved its other two China targets last year stabilizing market share and regaining profits.

It grabbed 17 percent of China's passenger car market last year, equal to the level in 2005, Vahland said, without revealing a specific financial result.

He hailed 2006 as a "turnaround" for the carmaker's China operations as the group suffered a plunge in sales and market share, and made losses in the nation over the previous two years.

The group's 2006 sales 628,807 Volkswagen-branded cars and 81,708 units under the Audi marque consolidated its position as top seller of passenger cars in China for the past two decades and maintained the nation's place as its second-biggest market after Germany.

China last year overtook Germany as the world's top market for the Volkswagen brand for the first time, Vahland said.

In Germany, the group sold 1.11 million cars last year, including 571,000 units under the Volkswagen badge.

Sales of all China-made vehicles rose by a quarter to 7.22 million units last year from 2005, including 4.25 million passenger cars, according to data from the China Association of Automobile Manufacturers.

But Vahland, also executive vice-president of the Volkswagen Group, predicted car sales in China would grow at a slower pace of 7 to 12 percent this year, partly because less all-new models will be launched.

Carmakers will launch around 30 all-new models in China this year, down from 63 last year and 55 in 2005, according to figures he provided.

Vahland said Volkswagen Group expects to increase sales and profitability in China this year. But he declined to give detailed figures.

"For me, profits are more important than sales growth," he said.

The carmaker will launch a Skoda Octavia compact sedan at the venture with SAIC Motor Co Ltd this quarter and a Volkswagen Magotan medium-sized sedan at the other partnership with First Automotive Works Corp in May, according to the two ventures.

To generate more profits, Volkswagen Group will continue to cut costs in China, mainly through raising the ratio of locally made parts used in its vehicles, Vahland said.

According to Volkswagen's plan revealed earlier, it aims to cut China costs by 40 percent in 2008 from 2005.

"We will speed up our decision-making process in China as it is the world's most competitive and fastest-changing car market where more than 60 brands are contesting," he said.

Japan's Honda Motor said yesterday its China sales grew by a quarter to 323,469 cars last year.

(China Daily January 12, 2007)

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