US auto giant General Motors announced an ambitious expansion drive in China Monday, investing more than three billion dollars over the next three years and doubling capacity as it strives to close the gap on market leader Volkswagen.
The world's number one auto-maker said the investment would be spread over a range of new projects including boosting existing manufacturing plants, new vehicle launches and a new engine plant.
It will also fund the launch of its long-awaited auto financing joint venture, with the investments funded by profits from GM's China joint ventures.
"Together, these investments will enable us to maintain our leadership position by growing with the market," Phil Murtaugh, chairman and chief executive officer of GM China Group said in a statement.
"GM remains highly confident in the long-term prospect of the China market. With the world's fastest-growing vehicle market, success in China is crucial to GM's global success."
He said vehicle assembly capacity would reach 1.3 million by 2007, up from the present 530,000, driven by expansion at GM Shanghai, its flagship joint venture with state-owned Shanghai Automotive Industry Corp (SAIC).
New manufacturing facilities will also be built.
The Chinese auto market has experienced phenomenal growth since early 2002, becoming one of the key pillars of the country's booming economy underpinned by rising urban household incomes.
Foreign manufacturers have been quick to realise the potential, with GM's profit from its China joint ventures in 2003 rising 207 percent to 437 million dollars, representing 11.5 percent of its overall earnings.
Its announcement Monday, on the eve of the Beijing Auto Show, signalled foreign carmakers' continuing confidence in the blistering pace of growth in the red hot market despite concerns of over-capacity in the sector.