"We are very near to our objective of selling cars produced in China to countries all over the world, if we bring car prices down and improve the quality," said Dr Bernd Leissner, president of Volkswagen's Asia-Pacific operation, who took office in March.

The headquarters of Volkswagen's Asia-Pacific operation, which deals with production, sales and after-sale services in China, Japan, Australia and other Southeast Asian countries, moved to Beijing from Wolfsburg this month, indicating that the company is attaching even more importance to the Chinese market.

China's fledgling auto market is facing intense challenges brought on by the country's entry to the World Trade Organization (WTO).

The total number of passenger car sales was as low as around 700,000 units last year.

Car exports are almost non-existent in China. Apart from being behind in technology, car prices in China are more than 30 percent higher than the average price worldwide.

The relationship between the company's two joint ventures in China, Shanghai Volkswagen Automobile Co Ltd and FAW-Volkswagen Automobile Co Ltd, is expected to be tightened to cut the high-flying costs for the auto giant's Chinese division, which would ultimately reduce Volkswagen's car prices in China.

Volkswagen's two Chinese joint ventures have occupied a joint market share of 54 percent in China's car sales for 15 successive years.

Leissner emphasized that the two ventures would "work much closer in the future for economic efficiency," but he denied earlier rumours of a merger between the two.

In order to cut costs, the two ventures will conduct parts purchasing together and most accessories and parts will be purchased from the domestic market.

Leissner believes that part of China's lofty car prices is caused by excessive importing of car accessories and parts. "Volkswagen will work together with our local suppliers to avoid unnecessary imports as early as possible."

In addition, the two separate sales channels of the two ventures along with the prospective third for Volkswagen's imported cars, will be integrated into a single one. The move will not only save the company the expense of building offices and maintaining employees, but will also bring convenience to Volkswagen buyers.

"Chinese customers will be able to buy any type of Volkswagen car at a Volkswagen dealer in the future," Leissner promised.

China is widely believed to be the world's fastest growing and largest auto market. A continuous growth in automobile consumption is foreseen.

"All the big international players in the world and many of their latest products will come to China in the next three to five years," Leissner stressed.

Competition will be even more intense, as the tariff for car imports will be reduced to 25 percent by the middle of 2006, according to China's WTO commitments.

Only a small number of China's 100 or so auto makers will survive the competition, Leissner predicted.

"We (Volkswagen) want to defend our piece of cake in China," the president said. Volkswagen reiterated its commitment to the Chinese market in April when it renewed its contract with Shanghai Volkswagen for another 20 years.

The two ventures plan to produce and sell 1-1.5 million cars per year by the year 2010, which will make up half of the total amount of car sales in China by that time.

"We will not only reduce car prices, but will bring Chinese customers more value for the same price," Leissner said.

"I believe that the biggest winner of the auto market competition should be Chinese customers," he concluded.

( June 05, 2002)