Part of campaign to boost production in East China

BEIJING - Shanghai Volkswagen broke ground on a new 300,000-unit plant in the eastern city of Ningbo, Zhejiang province last Saturday as it moves to further expand production capacity in China and meet increasing market demand.

The foundation laying ceremony was held in Ningbo on Jan 7 and the plant is scheduled to begin operations in 2013. [Photo/Provided to China Daily]

Signing ceremony of Shanghai Volkswagen's Ningbo project on Jan 6.[Photo/Provided to China Daily]

Scheduled to begin operations in 2013, the Ningbo plant will be the sixth for Shanghai Volkswagen, the joint venture between the German carmaker and its local partner SAIC Motor Corp.

It will have a workforce of several thousand employees by 2015, according to the company.

Volkswagen said that the new plant is part of its strategic plan to invest 14 billion euros ($17.8 billion) from 2012 to 2016 in capacity expansion and new products at its Chinese joint ventures.

The investment will be funded directly by the joint ventures, the company said. It did not specify how much money is going into construction and outfitting of the new Ningbo factory.

"China has become one of the largest and most important markets for Volkswagen Group," Karl-Thomas Neumann, president and CEO of Volkswagen Group China, said at a signing ceremony in Ningbo last Friday as an agreement was inked between the joint venture and local government.

"With our unprecedented investment program, we intend to increase our combined capacity in China to 3 million vehicles per year by 2013 or 2014," Neumann said.

Volkswagen's two joint ventures in China now produce about 2 million units annually.

Its partnership with SAIC Motor currently has plants in Shanghai and Nanjing, capital of Jiangsu province in eastern China.

It is building a factory in Yizheng, also in Jiangsu province, set to begin production at the end of this year with designed yearly output of 300,000 vehicles.

The Shanghai Volkswagen is able to produce more than 1 million Volkswagen and Skoda brand cars a year. It sold over 1 million cars from January to November last year, an increase of 13.7 percent over a year earlier.

Volkswagen operates another partnership with FAW Group in North China that produces its namesake brand and Audi cars. It has plants in northeastern city of Changchun, Jilin province and also in Chengdu in the southwest.

FAW-Volkswagen saw its yearly output hit 1 million vehicles in 2011 for the first time. Last year about 770,000 Volkswagen-brand cars and 252,000 Audis were built at the joint venture.

The venture has a new plant under construction in Foshan, a city near Guangzhou, which will be ready in 2013 with yearly capacity of 300,000 vehicles.

China first outperformed Germany in 2009 to become Volkswagen's largest market. Of every four cars Volkswagen now sells in the world, one is purchased in China.

The group is also the biggest passenger car provider in China. Its sales last year are certain to top 2 million units, though the final figure has yet to be released.

China's auto sales are projected to surpass 18 million vehicles this year, a modest increase of 2 to 3 percent over 2010.

Neumann said in an interview at last year's Guangzhou auto show that he forecasts China's passenger car market will grow 8 to 10 percent in 2012 and mostly maintain stable growth in the foreseeable future.