FAW-Volkswagen Ends Winter Production Capacity

At the end of September, FAW-Volkswagen Foshan Branch was officially completed and put into production, and announced that the iron triangle structure of FAW-Volkswagen's factories in Changchun, Chengdu and Foshan was formally formed.

Of course, there is another metaphor for the "winter" here. The completion of the first phase of the Foshan plant will further end FAW-Volkswagen's winter productivity. The first-phase production capacity of the 300,000 units of the Volkswagen GIODI brand will no longer have any worries for FAW-Volkswagen's goal of sprinting 1.8 million vehicles in 2015.

The increase is more from the western and southern parts of China. “The future Foshan branch will have a production capacity of 300,000 units in the first phase and 1,200 units per day. In this way, FAW-Volkswagen has achieved a national strategic layout of 1.8 million vehicles in the northeast, southwest, and southern China. In areas where the domestic market prospects and industrial infrastructure are very good, the core markets, production bases, and spare parts supply are unified.” Zhang Jiejie, a director and general manager of FAW-Volkswagen, explained the factory layout of the three places in an interview.

The layout of the three places is just the beginning. Next, the second phase of the Foshan plant will start construction soon. The construction will contribute another 300,000 vehicles. The Audi plant in Changchun will also have a significant increase in production capacity, adding another 300,000 vehicles by 2015. Judging from the information disclosed so far, the total capacity of FAW-Volkswagen could reach 2.4 million by the end of 2015 or when Foshan Phase II was completed in early 2016.

The capacity bailout has brought about a gradually increasing sales target. FAW-Volkswagen has revised its target at the end of last year to 1.8 million units in 2015, which is exactly the total capacity of FAW-Volkswagen after the first phase of production in Foshan. Under the fast-paced environment of the auto market, FAW-Volkswagen has placed its annual increments more in the western and southern regions. The first reason is that the OEMs have settled down in Chengdu and Foshan, and the second is the western part of the two cities. And southern China has strong spending power.

By 2015, Volkswagen will increase the number of domestic models. In order to support the grand capacity and sales targets, FAW-Volkswagen will also be active in product planning. The FAW-Volkswagen Foshan branch was put into operation on the same day and it was also the official off-line of Foshan's first product Golf Seven. This global cumulative sales volume has exceeded 30 million. Golf has a special significance for the seventh generation of products in Foshan. The first factory in Foshan, which has adopted the Volkswagen MQB platform in China, is positioned to produce high-quality A-Class cars. The A-Class hatchback golf with superior quality and reputation is exactly in line with this position, and it also caters to the higher consumption levels and demands of South China owners. Audi A3's sedan and hatchet settled in Foshan is the same reason. In the second phase of Foshan, 300,000 vehicles will also have new VW models and Audi models for localization. The first domestic plug-in hybrid models will be included. Zhang Jiejie disclosed to reporters that the next step in the launch of new products will speed up and further enrich the product line.

More than FAW-Volkswagen, the entire Volkswagen Group has adopted radical expansion strategies in China. Shanghai Volkswagen's Xinjiang plant had already put into production one month earlier. The Ningbo plant is in full swing. The newly approved Changsha plant will also be launched on the MQB platform. Heitzman said in an exclusive interview with reporters that at present, we provide 80 models to customers in China, 21 of which are produced in China. We plan to further expand our product line by 2015. The number of models offered will increase to 91 models, including 30 domestic models.

High-end dialogue Zhang Qijie, FAW-Volkswagen Director and General Manager:

Fixed capital accounts for only 2%-3% of project life cycle investment

Reporter: The investment in the Foshan factory is huge. From a financial point of view, how can we balance the future earnings of production models, such as pricing?

Zhang Jiejie: ​​The Foshan branch actually invests a lot, but we think that if we want to do a good job of product quality and make high-tech products, high investment is essential. In fact, FAW-Volkswagen has reduced investment as much as possible, so current investment is a necessary input after careful evaluation. In my personal experience, a project that operates very well, the investment in fixed capital accounts for only 2-3% of the entire life cycle, and even a low investment in a bad project can become a very serious burden.

Reporter: Does FAW-Volkswagen have a domestic mass-brand SUV plan before 2015?

Zhang Jiejie: ​​In the SUV field, FAW-Volkswagen's Audi brand has been more fully laid out. From now on, SUVs are indeed a relatively fast-growing market segment, but many factors will change, so we will consider these changes in the future product launch process. This is an initiative to adapt to the market.

Volkswagen China President and CEO Hezmann:

The increase in equity is only one of the contents of the discussion: The sales volume of SEAT brand and VW imported cars are relatively small. Is there a need for channel independence?

Heinzmann: It takes time to introduce a new brand. With regard to the development of Seat in China, we are also considering and studying the next steps. We are evaluating different options.

Reporter: Is there any expectation for the adjustment of the equity issues of Volkswagen Group and FAW Group? Heinzmann: Volkswagen and FAW have long-term successful cooperation and our joint venture agreement expires in 2016. We started to communicate and discuss with FAW a few months ago to further extend the cooperation agreement. Our strategic goal is to expand cooperation with FAW and cooperate in more areas. The new areas of cooperation include new products, used car businesses, and automotive financial services. Increasing equity is just one of many discussions.