SHANGHAI - Volkswagen will subcontract production of its original model in China, the Santana sedan, to clear space for newer models at its huge joint-venture plant here.
The move to the Yizheng plant of Shanghai Automotive Industry Corp., VW's 50-50 partner in Shanghai
Volkswagen, will open capacity for the Touran minivan and Polo subcompact in Shanghai.
Touran production will start in late 2004, says Hans-Juergen Gawron, product engineering division manager.
The Santana, a rugged version of the VW Passat developed in Brazil, went into production here in 1985 and became the country's top-selling car quickly.
Demand for it and the Passat have kept the Shanghai plant operating near its capacity of 450,000 units a year ever since, preventing VW from installing other models there.
Santana sales last year edged up 1 percent over 2001, to 96,000 units, according to VW.
"We always thought our production would drop, so we would have capacity for new models," says Albrecht Stalmann, Shanghai VW's production manager. "But that didn't happen. Instead the market is exploding this year. We expect the passenger car market to hit 1.9 million."
In 2002, Volkswagen and Audi reported combined sales of a record 513,000 vehicles in China. This year, Volkswagen Group expects sales to top 600,000 units.
In the face of such steady demand, VW is in no hurry to drop a fully amortized Santana from its lineup. That explains the decision to subcontract its production rather than drop it.
"Given how old this model is, some people think we should stop making it," says Lu Jun, a spokesman for Shanghai Volkswagen. "But we figure with so much demand for cars in China, why stop? Ordinary people like it."
The shift of the Santana to Yizheng marks the first time VW has subcontracted any of its production in China, although other companies have done so.
In December of 2002, Shanghai-General Motors paid $108 million for a 50 percent stake in Yantai Bodyshop Corp., which will produce the Buick Sail subcompact.