Skip navigation
Newswire

UPDATE 2-VW China sales growth slows in third quarter

(Recasts throughout, adds Asia Pacific and global sales)

By Ben Blanchard

SHANGHAI, Nov 13 (Reuters) - German auto maker Volkswagen AG reported on Thursday a slowing of its sales growth in the intensely competitive Chinese market in the third quarter and said its dominant market share had been cut to less than a third.

Volkswagen said it had sold 490,279 vehicles in China in the first three quarters of 2003, up 33 percent from a year earlier. But this growth rate was slower than the 52 percent growth seen in the first six months and slower than the market's growth rate.

Total car output in China rocketed to 1.44 million in the first three quarters, up 87.2 percent on a year earlier, official figures show, prompting fears of a margin-sapping glut as auto makers pump billions of dollars of investment into China.

Detroit's big-three car makers -- Ford Motor Co , General Motors Corp and DaimlerChrysler AG -- added to the pressure on Wednesday, saying they would export thousands of U.S.-made vehicles to China in the next two years.

A company executive said VW's market share in China, its largest market outside Germany, had dropped by about five percentage points from the middle of the year, but this was not a cause for alarm.

"We would have been able to sell more if we could have produced more," said Michael Wilkes, Volkswagen's China-based spokesman. "That we have a lower market share is also true, because we can't grow as fast as the market grows."

But analysts pointed to stiff competition.

The company has two main ventures in China, one in the eastern commercial centre of Shanghai and the other in the northeastern city of Changchun, and has just over a third of the market.

Shanghai Volkswagen, a joint venture with Shanghai Automotive Industry Corp, sold around 286,000 units in the first nine months of the year, up 34 percent, the company said previously. It expected to sell just under 400,000 this year.

STILL ON TOP

Volkswagen's rise in Chinese sales has lagged that of its main foreign competitor in the country, General Motors Corp , whose sales were up almost 38 percent to 267,395 units in the January-to-September period from a year earlier.

But while Volkswagen may be losing market share, it still remains the dominant auto maker in China. GM is in second place, with just under 10 percent of the market. Its Chinese sales represented about 19 percent of Volkswagen's 2.58 million total from January to September.

Analysts said Volkswagen was facing pressure from new products in the middle of the market, in which it has traditionally been strongest.

"Last year growth was fastest in sales of economy cars," said Gu Qing, who watches China's car industry for Haitong Securities. "This year it has moved up a gear, with sales fastest in the 150,000 yuan ($18,122) to 200,000 yuan price range."

GM's newer Regal and Excelle have eaten into a market once dominated by Volkswagen's Santana, Bora and Audi brands, she said.

The Shanghai-produced Buick Excelle, which hit the market in August, has a waiting list of about 20,000, GM has said.

Earlier in the month Goldman Sachs said in a research report that Volkswagen's margins in China in the third quarter had been cut by more than half because of increased competition and over-production.

Volkswagen, also Europe's largest auto maker, is investing six billion euros ($6.98 billion) to double annual production in China to 1.6 million vehicles in five years. ($1=8.277 yuan) ($1=.8600 euro)