Autos News

Volkswagen says won't delay China plant expansion

SHANGHAI (Reuters) - Volkswagen AG VOWG.DE said it has no plans to delay the expansion of a car manufacturing plant in southwest China, denying a local media report.

The Oriental Morning Post reported on Wednesday that FAW Volkswagen, the European firm’s venture with FAW Group, planned to postpone expanding a plant in the city of Chengdu by a year as a slowing economy curbs automobile demand in the country.

The new assembly line was previously scheduled to start operating in 2010, making 200,000 Jetta and Sagitar sedans annually, but the venture has decided not to proceed with the expansion before 2011, the newspaper said, citing unnamed sources.

Volkswagen’s China spokesman told Reuters the automaker had no plans to delay the plant’s capacity expansion, currently at 20,000 units.

He declined to give details about the Chengdu plant expansion but said Volkswagen’s commitment to invest 2.4 billion euros ($3.12 billion) in the country three years from 2008 remained unchanged.

FAW Volkswagen set up the Chengdu plant in July 2007 with an initial capacity of 150,000 units. The facility plans to have a total capacity of 350,000 units eventually, the report said, citing information previously provided by the venture.

FAW Volkswagen executives could not be immediately reached after repeated phone calls.

Car sales growth in China, the world’s second-largest auto market slowed to a single-digit rate in 2008 for the first time in at least 10 years as consumer confidence waned with a slowing economy.

All major foreign automakers operating in the country have reported slower growth in China last year.

Sales of Volkswagen in mainland China, Hong Kong and Macau increased 12.5 percent to 1.02 million vehicles in 2008, down from 28 percent growth in the previous year.

General Motors' GM.N sales in the country rose 6.1 percent to 1.09 million vehicles last year, down sharply from 18.5 percent growth in 2007.

($1=.7684 Euro)

Reporting by Fang Yan, Editing by Jacqueline Wong