Volkwagen to build new factory in China image

Volkswagen AG (VOW.XE) plans to build a new factory in China as Europe’s largest carmaker expands operations in the world’s biggest auto market, two officials said.

VW Chief Executive Officer Martin Winterkorn will announce (Monday) the plans alongside Chancellor Angela Merkel and Chinese Premier Wen Jiabao, Handelsblatt said, citing the people.

The factory, to be built in partnership with Shanghai Automotive (SAIC), will be the first foreign enterprise in a region that has frequently been the scene of unrest. The Xinjiang-based Tianshan Net said the Urumqi plant would cost some 2 billion yuan (290 million dollars) and be completed by next year by Volkswagen‘s joint venture with the Shanghai Automotive Industry Corporation (SAIC).

VW, the first overseas car maker to enter China three decades ago, said last year it planned to spend 14 billion euros on new plants and products in China through its joint ventures.

The German automaker, will also debut its first plug-in hybrid-electric vehicle in China in 2015.  VW China operations chief Karl-Thomas Neumann said EVs are “desperately needed” in China.

According to the plan, Volkswagen’s joint ventures with China’s FAW and SAIC will develop their own EVs, start producing in 2014 and are expected to ramp up production to 100,000 by 2018.

Volkswagen sold nearly 2.3 million vehicles in China last year, more than a quarter of the 8 million vehicles it sold in total.