Volkswagen AG may expand production of a mid-sized sedan designed for U.S. customers to China in a bid to win buyers in the world’s biggest auto market.
The model, which will be priced at about $20,000, will be built to begin with at VW’s new plant in Chattanooga, Tennessee, and sold in the U.S. in the second half of 2011.
“We will see demand for this car growing in other countries such as China,” said Ulrich Hackenberg, head of Volkswagen’s brand development, in an interview. “Our production pattern allows us to transfer vehicles from one plant to another at relatively low effort.”
VW, aiming to surpass Toyota Motor Corp. in sales and profitability, is relying on China to meet a goal of increasing global deliveries to 10 million by 2018. It announced the addition of two Chinese factories this year to double production in VW’s biggest market to 3 million cars within four years.
VW preferred shares gained as much as 2.28 euros, or 2.7 percent, to 86.25 euros and were up 2.23 euros as of 10:46 a.m. in Frankfurt trading. The stock has advanced 32 percent this year, valuing the carmaker at 37.4 billion euros ($52 billion).
Europe’s largest carmaker plans to invest 6 billion euros in China for the expansion and add new models. Eight-month VW sales in China expanded 41 percent to 1.29 million vehicles.
China’s auto market may grow 52 percent to annual sales of 19.2 million vehicles in the next eight years, Hackenberg said yesterday in Wolfsburg, Germany, where VW is based.
“China is VW’s undisputed No. 1 priority,” said Juergen Pieper, a Frankfurt-based analyst at Bankhaus Metzler who recommends selling VW stock. “A third of VW group profits stem from China and its weight is likely to increase rather than decrease. China continues to be a goldmine that VW can’t afford to let go.”
Volkswagen has a goal to produce 67,000 units of the new midsize sedan in Chattanooga next year and increase that level to 150,000 per year from 2012, according to a slide presentation by Silke Lerche, VW’s group quality director.
“The U.S. market offers great opportunities,” Jonathan Browning, VW’s new U.S. chief, said during his first public appearance in Europe since taking over the new job at VW. “It’s all part of our global expansion strategy.”