Shanghai-Volkswagen Considering New Plant in Xinjiang

BEIJING – Shanghai-Volkswagen may build its sixth plant in Xinjiang instead of the long-suspected location of Ningbo, according to a report on auto.163.com quoting an insider who declines to identify himself.

Reportedly responding to a “suggestion” from the National Development and Reform Commission (NDRC), Shanghai-Volkswagen will conduct onsite research at Urumqi, capital of the Xinjiang Uygur Autonomous Region.

China Automotive Review

Shanghai-VW looking to add to current vehicle assembly capacity.

“If everything goes smoothly, Shanghai-Volkswagen will have 300,000-unit production capacity in Xinjiang,” said the insider.

The Ningbo city, located in southeast China’s Zhejiang Province with the largest port of China, may lose the bid to Xinjiang due to political reasons, said the insider.

The central government has designated 19 inland cities responsible for direct assistance to cities in Xinjiang and Shanghai is one of the supporting cities.

According to an unconfirmed market research report, automobile markets in Xinjiang concentrate in the Urumqi, Karamay and Korla regions.

Xinjiang’s motor vehicle parc totaled 2.09 million units by the end of 2008, up 7.2 percent on a yearly basis. Passenger vehicles totaled 920,000 units and commercial vehicles 290,000 units, up 12.2 and 6.3 percent year-on year respectively.

Urumqi had a vehicle parc of 302,866 units in 2008, up 17 percent year-on-year. However, the number is much less than Ningbo’s 884,000-unit vehicle parc, said the report.

According to auto analyst Zhang Zhiyong, Xinjiang is not an ideal location for market operations due to its inconvenient traffic, high logistics costs, small market demand and lack of human resources.

“But the low construction cost of an assembly plant, on the other hand, is an advantage of Xinjiang,” added Zhang.

Shanghai-Volkswagen may enjoy government preferential policies such as large subsidies for assisting Xinjiang.

“Shanghai-Volkswagen’s Xinjiang plant can also serve auto markets in Central and West Asia,” Zhang said.

It is reported that Shanghai-Volkswagen has exported its products to Kazakhstan through Xinjiang Khorgos port in the past years.

According to statistics from Urumqi Customs, Xinjiang has exported 3,213 vehicles valued at $127 million through April this year, up 93 and 76 percent, respectively, compared with the same period last year.