Shelved for a year, plans are finally approved for its first southern factory

BEIJING - The National Development and Reform Commission (NDRC) has finally approved FAW Volkswagen's new plant in Guangdong province, a year after the nation's top economic planner received the proposal, according to the district government of Nanhai in Foshan city, where the facility will be located.

Local media reports said the NDRC shelved consideration of the facility due to tighter regulations that forbid joint ventures from building factories in new locations unless they produce self-developed brands and new-energy vehicles.

The Guangdong plant is an important move for the Sino-German joint venture to further tap the potential of the auto market in South China, the reports said.

To be built in the Hongsha high-tech industrial park in Nanhai, the facility will require an investment of 13.3 billion yuan in its first phase and is expected to enter production in 2013 with annual capacity of 300,000 cars.

Volkswagen sold 1.92 million vehicles in China last year, some 17 percent of the country's entire passenger vehicle market.

But it lags behind Japanese competitors Toyota, Honda and Nissan in South China, where Volkswagen's market share of about 10 percent is its weakest region in the nation.

Its joint venture with FAW only has about 50 dealerships in the south, less than one-sixth of its nationwide total.

Industry observers say the number is likely to reach 100 by 2013 after the Foshan plant is completed.

The joint venture signed an agreement with the local government last June for the new facility, but the NDRC delayed approval.

FAW Volkswagen unveiled a pure electric car brand called the Kaili last month, which meets the NDRC's stated criteria as both a self-developed brand and an electric vehicle.

Jia Xinguang, an independent auto analyst in Beijing, said the delayed approval indicates stricter guidelines for any similar plans by joint ventures in the future.

Foreign carmakers including GM, Nissan and Honda have now all developed local brands at their joint ventures in China.

The first car from the China-only brand Everus made by the joint venture between Guangzhou Automobile and Honda went on sale in April.

The Baojun, a locally developed brand from SAIC-GM-Wuling, made its debut at the 2011 Shanghai auto show in April and is expected to hit the market later this year.

FAW Volkswagen's Kaili car will not have volume production at the Foshan plant in the near future, the company said.

"Development of the Kaili is only to prove that we have the ability to make electric cars and a self-developed brand. Whether it will be mass produced or not is subject to later discussion," said an executive at the company who asked for anonymity.

FAW Volkswagen now has a production base in the northeastern city of Changchun with an annual capacity of 660,000 units and another in Chengdu in the southwest that has a capacity of 150,000 vehicles.

Local media reported that the Foshan facility will produce the latest-generation Golf, while discussions are underway with Audi to make some models of the luxury brand owned by Volkswagen.

China Daily