Volkswagen doubles profit thanks to record sales in China

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With approximately 80 different manufacturers now, the market also became more competitive, says Amaki, but adds that there is still plenty of room to expand: China’s average level of car ownership is still only at 47 cars per 1,000 people, compared to the global average of 140 cars. With this perspective the goal formulated by Volkswagen CEO Martin Winterkorn to reach yearly sales of 2 million units even before 2018 seems realistic.

In order to create the necessary capacities for expansion in sales, Volkswagen plans to invest 4 billion euros in the next two years, constructing two new car factories. The carmaker was one of the first to establish operations in China in 1984 and is working together with two different joint-venture partners, FAW and Shanghai Volkswagen Automotive (SVW). But lately, Volkswagen and other foreign carmakers have been challenged by domestic automakers like BYD which are growing faster and gaining market share.

The Chinese market as a whole faces challenges as well, at least temporarily.

The demand for cars is already showing a slow-down which is expected to persist in the second half of 2010 by several companies and analysts like Amaki.

At the same time, labor issues that have surfaced at some parts suppliers for Japanese and Korean automakers -- for example, forcing Honda to halt production in one of its Chinese factories -- will compel suppliers to spend more capital to automate their production.

However, in the bigger picture these hurdles seem rather insignificant.

Nearly every company is announcing record sales and results. Nissan and Hyundai Motors also reported their numbers on Thursday, with the Korean carmaker achieving its best quarterly net result ever, rising by 71 percent to $1.2 billion. Meanwhile, Nissan recovered from the recession and experienced its best quarter in two years by posting a profit of nearly $2 billion.

For Volkswagen, China´s automotive market is the declared battleground to overtake Toyota, in order to become the worlds largest car maker.