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Billions Poured into Car JV
German automaker Volkswagen AG and its partner the Shanghai Automotive Industry Corp (SAIC) will jointly pump 3 billion euros (US$3.44 billion) into their local joint venture - Shanghai Volkswagen (SVW) - over the next five years, according to top SAIC executives.

The massive investment plan is expected to strongly boost SVW's output capacity in order to help its parent companies better weather the growing domestic market competition.

"We've planned to raise SVW's annual production capacity to 700,000 units in five years' time from now," said Hu Maoyuan, SAIC's president. Currently, SVW's yearly output capacity is around 350,000 units.

The goal, if achieved, will enable SVW to contribute a major part to the ambitious blueprint of SAIC, which has targeted raising its annual vehicle output from the current 410,000 units to 1 million by 2007.

SVW has started to expand the output volume of its No 3 plant, mainly devoted to the production of its Passat series sedans, according to Hu.

Analysts believe the Passat series represents a high-end segment in SVW's product portfolio, which is able to bring more added-value to the firm than its other cheaper middle or low-end products like the Polo, Gol and Santana, manufactured at its No 1 and No 2 plants.

Plans to set up additional manufacturing facilities outside Shanghai are also under consideration, Hu said.

Details of the investment increment plan are not available.

SVW's move seems to echo the earlier announcement of the First Automotive Works Corp (FAW), revealing that it will team up with Volkswagen to pour 1 billion euros (US$1.15 billion) into the two's existing joint venture FAW-Volkswagen Automotive Co in Changchun, capital of northeast China's Jilin Province.

The investment will enable the venture to build a new plant with a capacity of 330,000 vehicles when it is completed by 2007.

Industry analysts believe such moves reflect Volkswagen's resolution to beat off intensified competition from rivals and secure its reign on the Chinese market.

As the first foreign automaker producing passenger cars in China, Volkswagen had held more than half of the domestic market by 2001 through its two 50-50 local joint ventures, SVW and FAW Volkswagen.

Its market share, however, dropped to around 40 percent in 2002 mainly because of growing market competition, although it sold about 513,000 cars for the year.

The German company said it aims to increase its annual sales in China to 1 million units by 2007.

(China Daily July 12, 2003)

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