Perfect 10: Volkswagen To Build Tenth Plant in China

To further secure itself as China’slargest automaker, Volkwagen has announced it will build a tenth plant in the world’sbiggest automotive market, this time in the southern province of Foshan, Guangdong.

The plant will help alleviate VW’s other facilities that are running well over their allotted capacities. It will also play a huge role in achieving officials’ goal of doubling the region’s sales to 3 million units in four years’ time.

So just how important is China to the automotive industry?

Take last month. In May 2010, collective sales soared 26 percent versus the same time in 2009 to 1.04 million vehicles. Volkswagen’s sales have taken a similar upward path. From January to May, sales of VW Group models in China increased 48 percent to 278,000 units. Let’s say that again: 48 percent. It’s no wonder the German brand is pumping more than $7.2 billion into the region through 2014.

By mid-2013, the $622 million, 420-acre facility in Foshan, Guangdong province should be up and running with a capacity of around 300,000 units per year. It’ll employ 4000 workers and is expected to play a huge role in Volkswagen’s globalized EV and hybrid initiatives, too. Eight years from now, executives want 300,000 VW-badged EVs roaming the world’s roads, and guess what? China will get the bulk of them.

“China is the most important market worldwide for the Volkswagen group,” CEO Martin Winterkorn said in a recent statement. “The success of e-mobility in China is decisive for the global execution of the e-mobility strategy.”

Aside from China, VW is looking to take a bigger piece of the U.S. market. It recently announced its intentions to double American sales (213,454 units for VW in 2009; 297,537 units for VW Group) in as soon as two years.

So, we ask you: Is the steady and rapid Chinese growth worthy of all this investment?

Or will VW — and other large automakers — soon find themselves at overcapacity in an unsustainable market?

Source: Bloomberg, Volkswagen

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