November 18, 2016 / 7:24 AM / 3 years ago

China SUV wars to heat up as Volkswagen unveils two new models

A Teramont SUV is introduced by Volkswagen at China (Guangzhou) International Automobile Exhibition in Guangzhou, China November 18, 2016. REUTERS/Bobby Yip

GUANGZHOU, China (Reuters) - Volkswagen AG (VOWG_p.DE) unveiled two sport-utility vehicles for the Chinese market on Friday, the first in a planned wave of new models for a booming segment where it has lagged rivals.

VW’s venture with SAIC Motor (600104.SS), China’s largest automaker, took the wraps off the Teramont large SUV at the Guangzhou auto show, which opened Friday. Its venture with China FAW Group [SASACJ.UL] displayed a smaller C-Trek crossover SUV.

SUV sales have soared in China in recent years with consumers choosing larger cars as they grow wealthier. Sales in the segment are up 46 percent in January-October from the same period a year earlier.

“We have not forgotten promises we made… We will introduce more SUVs to the market. Here today you can see how we deliver on our promises,” said Stephan Wollenstein, head of VW brand passenger cars for China.

Volkswagen, which has until now had only one locally made SUV, the Tiguan, plans to launch another four SUVs before 2019.

The two new SUVs must, however, share a stage with a long list of similar launches as Honda Motor Co (7267.T), Nissan Motor Co (7201.T), Ford’s (F.N) Lincoln and several other brands will also show new models at the Guangzhou auto show.

Chinese demand for SUVs can be an important driver for profits with Honda last month lifting its annual earnings estimate, helped in part by strong sales of its XR-V and Vezel SUVs.

The SUV share of China’s auto market is still far lower than that of the U.S., suggesting plenty of room for the segment to grow but increased competition is putting pressure on sales prices and margins.

Reporting by Jake Spring; Editing by Edwina Gibbs

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