German carmaker Volkswagen has denied reports that it would postpone the expansion of a manufacturing plant in south-west China.
The announcement came as commentators predicted that China would overtake the US this year to become the world’s biggest automotive market.
It was reported that FAW Volkswagen, the European group’s joint venture with FAW Group, planned to postpone expanding a plant in the city of Chengdu by a year as a slowing economy curbs automobile demand in the country.
The new assembly line was previously scheduled to start operating in 2010, making 200,000 Jetta and Sagitar cars annually, but the venture has decided not to proceed with the expansion before 2011, a Chinese newspaper claimed.
Volkswagen’s China spokesman said the automaker had no plans to delay the plant’s capacity expansion, currently at 20,000 units.
He declined to give details about the Chengdu plant expansion but said Volkswagen’s commitment to invest 2.4 billion euros in the country in the three years from 2008 remained unchanged.
FAW Volkswagen set up the Chengdu plant in July 2007 with an initial capacity of 150,000 units. The facility plans to have a total capacity of 350,000 units eventually.
Car sales growth in China slowed to a single-digit rate in 2008 for the first time in at least 10 years as consumer confidence waned with a slowing economy.
All major foreign automakers operating in the country reported slower growth in China last year.
Sales of Volkswagen in mainland China, Hong Kong and Macau increased by 12.5 per cent to 1.02 million vehicles in 2008, down from 28 per cent growth in the previous year.
Meanwhile, China’s frugal ways and deep pockets should keep it well ahead of other large developing nations as they tackle a global financial crisis, according to Standard & Poor’s.
Indeed, the ratings agency argued that so-called BRIC countries – Brazil, Russia, India and China – should not really be grouped together at all because their outlooks are increasingly divergent.
“China is probably best positioned to find solutions, in particular fiscal stimulus, to withstand an externally driven crisis,” said S&P analyst Frank Gill.
He cited a strong budget, a more closed financial system and low debt levels as underpinning China’s strength, but warned that these resources must be deployed wisely.
“Without sufficient and protracted stimulus, we think China’s economy could potentially suffer a severe shock, which could inflame social pressures with political repercussions,” said Mr Gill
China announced a nearly US $600 billion stimulus package late last year.