R&D and new product

FAW Volkswagen and Audi jointly set up a technical R&D center in Changchun this year.

The joint venture will have capabilities to design auto bodies next year for Audi, An said. The technical center will have 1,130 employees by 2015, up from fewer than 800 now.

The FAW Volkswagen will produce the Audi Q3 small SUV in 2012. [Photo/China Daily]

He said FAW Volkswagen will produce Audi's full lineup in the "A, B, C segments" - or compact, mid-sized and large-sized cars - in the coming years.

Audi's all-new A6 sedan will be assembled at the joint venture before the end of this year and hit the market in the first quarter of next year, An said. The joint venture will also produce the Audi Q3 small SUV in 2012.

He said the joint venture will introduce petrol-electric hybrids of the Audi A6 and Q5 next year, when it will also start R&D on purely electric Audi vehicles.

He said FAW Volkswagen will kick off commercial production of purely electric Audi cars in 2017. By 2020, all of Audi's local-made models will have purely electric versions.

Dominique Boesch, chief of the Audi sales division at FAW Volkswagen, said the A1 e-tron and A3 e-tron - two models highlighting the brand's latest electric technologies - will be road tested in China in the second half of this year.

Audi revealed earlier that it would launch the A1 and A7 vehicles as imports in China later this year.

Audi now has 185 dealerships across China, the largest sales force among all luxury car brands.

The number will rise to 245 by the end of this year and to 500 in the years to come.

The brand now has dealerships in all of China's first-tier cities and 91 percent of second-tier cities.

Booming demand

Demand for luxury cars in China is predicted to increase rapidly over the next 10 years due to the country's economic growth and expanding number of wealthy consumers.

According to a forecast by the State Information Center, the luxury car market in China will grow to 2.3 million units a year by 2020 from the 860,000 units expected this year.

In the first half of this year, luxury car sales in China rose 40 percent to about 443,000 units, according to data from Audi.

Although the pace is down from the 95 percent increase last year, it is still much higher than the 11.9 percent growth in the overall passenger car market in the first half of the year.

About 960,000 people on the Chinese mainland had a personal wealth of at least 10 million yuan by the end of 2010, according to the Hurun Wealth Report 2011. The figure was up 9 percent from the previous year.

Acute competition

BMW and Mercedes-Benz are also accelerating investment in China with expansion of their local production capacity and introduction of more models.

BMW will increase production capacity of its existing joint venture plant in Shenyang, Liaoning province to 100,000 units annually this year from 80,000 units last year.

The company is also building a new plant in the city with a production capacity of 200,000 units a year. The new factory will be operational next year.

BMW will start to produce samll SUV, the rival model of the Audi Q3, later this year in China. The brand's all-new 3 Series with an extended wheelbase will be made in China next year.

Mercedes-Benz's parent company Daimler AG's joint venture in Beijing will boost annual production capacity to as much as 500,000 units by 2015, according to Xu Heyi, chairman of the joint venture's Chinese partner Beijing Automotive Group Co Ltd.

Daimler and Beijing Automotive recently agreed to co-invest 2 billion euros ($2.82 billion) in local production of new Mercedes-Benz cars and engines as well as the establishment of an R&D center.

The joint venture, which now makes Mercedes-Benz E-Class and C-Class sedans, plans to build the GLK compact SUV later this year and three other compact models after 2013.