German automotive giant Volkswagen AG has reached an agreement with the Chinese government to build a new production plant in the western province of Xinjiang. Reuters reports that some controversy has been attached to the move, as Xinjiang is home to the Uighurs, a Muslim minority in China that is opposed to the government’s unofficial efforts to marginalize its culture.
A VW factory in Urumqi
Volkswagen’s new automotive factory will be built in Xinjiang’s capital city of Urumqi. Production capacity will reportedly be 50,000 vehicles per year, noted German media service DPA on Wednesday. In order to procure funding for the Urumqi factory project, Volkswagen has joined forces with Chinese automaker Shanghai Automotive Industry Corporation (SAIC). DPA reports that the VW factory will cost approximately $315 million.
A signing event
Reuters quoted a source within the German government who confirmed a formal agreement ceremony will be held in Germany on Monday, April 23. German Chancellor Angela Merkel and Chinese Premier Wen Jiabao will sign the Volkswagen/SAIC factory agreement before the press.
Volkswagen’s fifth Chinese factory
Volkswagen’s upcoming Urumqi plant, which will begin production in 2013, will be the fifth automotive factory Volkswagen AG has built. Four additional plants are currently in the early planning phase. In total, Volkswagen has six component production factories in China.
VW sales spike in China
Sales of Volkswagen vehicles in China hit a record in the first quarter of 2012, when 633,000 vehicles were purchased. Through 2016, Volkswagen plans to invest $18.4 billion in the Chinese automotive market.
Volkswagen AG chairman Martin Winterkorn told Chinese online media outlet Tianshan Net that the Urumqi plant is a key piece in VW’s strategy of expansion into China’s less developed inland areas.
“Shanghai Volkswagen plans to manufacture car models with the most advanced technology and based on the latest platforms in the Xinjiang project,” said Winterkorn.
Uighur minority and ethnic tension
Volkswagen is the first international automotive company to bring production forces into the interior of China’s far west. The region has been troubled ethnic tension and violence between minority Uighurs and the majority Han Chinese. In 2009, 200 people died as a result of violence between Uighur separatists and Chinese authorities. Uighur representatives have criticized what has been perceived as political and cultural oppression from the Communist Chinese government.