Volkswagen Sees 25% Gain In 2007

Topics:  Volkswagen

Anthony Fontanelle
July 3, 2007

Volkswagen AG's joint venture with First Automotive Works Corp. (FAW), one of the leading Sino-foreign auto partnerships, expects its profits to increase this year by at least a quarter, helped by brisk sales and cost-cutting efforts.

The venture, FAW Volkswagen, in the northeastern city of Changchun, will have a "minimum" profit growth of 25 percent this year from 2006, said Joachim Wedler, its vice-president in charge of finance. But Wedler did not reveal how much the firm, in which FAW holds a 60 percent stake and Volkswagen 40 percent, will earn this year.

Weiming Soh, the venture's sales chief, said that it plans to sell more than 400,000 cars this year, up from 350,000 units in the previous year. In the first five months, its retail sales jumped by 25.1 percent year-on-year to 173,218 units, landing on the third post after General Motors' venture with SAIC Motor Corp and Volkswagen's other partnership with SAIC. FAW Volkswagen's June sales are expected to exceed 40,000 units, Soh said.

The company's bold profit and sales projections came amid blistering growth of China's vehicle market. Sales of all China-made vehicles increased by 22 percent to 3.65 million units from January to May, including 2.12 million passenger cars, according to industry data.

In the first four months, combined profits of the top 16 Chinese auto groups reached 18.1 billion yuan, rocketing by 51.3 percent. Wedler said that FAW Volkswagen will use more locally made engines and spare parts to cut costs. "We are shooting for a very high localization rate to have more financial power to beat competition," he said, without elaborating.

In China, the competition in the passenger car market is getting tougher and tougher. It is further bolstered by the rising price incentives and a number of product launches. Automakers offered some 50 price cuts in the first five months of this year, according to data from FAW Volkswagen. An Tiecheng, the venture's general manager, said that it plans to roll out at least two new models under the Volkswagen and Audi marques annually in the next five years to lure increasingly sophisticated auto purchasers. Audi is the luxury car unit of Volkswagen.

The venture will introduce a Volkswagen Magotan large-sized sedan next month. Its current lineup includes Volkswagen's Jetta, Bora, Golf, Sagitar and Caddy as well as the Audi A6 and the A4.

The Volkswagen Mangotan, also called the Passat, Corsar, Dasher, Quantum and the Santana in other territories, follows the latest design philosophy first introduced on the VW Phaeton luxury car. The new styling is a dramatic departure from the styling of the B5.5 Passat. Although the new design using improved VW parts is somewhat controversial, sales have improved over the old model.

The four-wheel drive version, the transverse-engine platform dictated a switch from the Torsen center differential of the B5 to the Haldex multi-plate clutch. This modification also changes the handling closer to a front-wheel drive car, with better fuel economy and a more spacious interior.

The Mangotan also features Fuel Stratified Injection in nearly every petrol version. It ranges from 1.6 to 3.2 L, but the multivalve 2.0 L TDI is the most sought out version in Europe. In the United States, it features a 200 horsepower 2.0 L turbocharged I4 as the base engine, or a 280 horsepower 3.6 L VR6 engine as the upgrade and six-speed manual and automatic transmissions.

The Wolfsburg-based automaker is one of the world’s biggest producers of passenger cars. The German company also is Europe’s largest automaker. Volkswagen also produces the Rabbit, New Beetle, New Beetle convertible, GTI, GLI, Eos, and the Touareg through about 600 independent dealers in the United States.

Source:  Amazines.com