Volkswagen To Ramp Up China Investment, Build Two New Plants

Volkswagen AG (VOW.XE) said Monday it will increase investment in China by EUR1.6 billion to EUR6 billion and build two new plants there, the latest sign of global automakers shifting their focus to Asian growth markets.

"The growth of the Chinese market exceeds all expectations," Volkswagen Chief Executive Martin Winterkorn said in a statement, adding that the additional investment should pave the way for the further expansion.

Volkswagen's global sales in the first quarter soared 25% from a year earlier to 1.73 million vehicles, fueled mainly by booming demand in China and Brazil. China alone accounted for 457,300 vehicle sales in the first three months of the year, up 61% from the same period last year.

Volkswagen's large presence in China, which it gained partly through an early market entry in 1984 as the first Western auto maker, along with a relatively small exposure to the U.S. market downturn last year, helped it to steer through the industry gloom better than most of its international rivals.

Europe's largest automaker by sales operates two joint ventures in China, Shanghai Volkswagen Automotive Co. and FAW-Volkswagen Co., with Volkswagen owning a 50% stake in the SVW joint venture and a 40% stake in FAW-VW.

-By Christoph Rauwald, Dow Jones Newswires; [phone]; [e-mail]