German carmaker Volkswagen Group announced on Friday it plans to lower the fuel consumption and exhaust emission of its China-made cars by more than 20 percent by 2010 with the introduction of its latest-generation engines and gearboxes.

Under a plan labeled "China Powertrain Strategy", the group will spend US$600 million on the manufacture of its most advanced engines and gearboxes with local partners to equip all of its new cars built in the world's second-biggest vehicle market, said Winfried Vahland, Volkswagen's executive vice-president and China chief.

Vahland said Volkswagen's plan is in response to China's goal to cut energy consumption per unit of gross domestic product in 2010 from 2005, which was announced by Premier Wen Jiabao at the beginning of March.

"Volkswagen Group China takes its responsibility as a market leader to guarantee growth in compliance with environmental protection and ahead of government regulations," he said.

As a first step in its plan, Volkswagen on Friday started production of its 1.8-liter turbo FSI, four-cylinder, four-valve engine in a joint venture in Dalian with the First Automotive Works Corp (FAW), China's No 2 vehicle group.

The engine produces a maximum power of 118KW/5,000-6,200rpm and offers a top torque of 250Nm/1,500-4,200rpm. It will be fitted in two models to be introduced in China - the Magotan mid-sized sedan and the Octavia compact sedan.

The Magotan will be manufactured in June at Volkswagen's car venture with FAW in the northeastern city of Changchun. The Octavia will be launched in May at the German group's other car venture in Shanghai with SAIC Motor Co Ltd, China's top automaker.

The engine venture in Dalian, in which Volkswagen and FAW hold 60 and 40 percent stakes, will have an annual production capacity of 300,000 units by 2011 with a total investment of 1.5 billion yuan. The plant will also assemble a 2.0-liter engine in the future. The venutre's engines will also supply Volkswagen's markets abroad.

Vahland said Volkswagen will reveal detailed plans before the end of this year to bring its other advanced engines as well as gearboxes into China's production.

The group will also use light-weight material technology in the components of its vehicles made in China to further reduce their fuel consumption and exhaust emission, he added.

Volkswagen has another engine joint venture in Shanghai. It manufactures gearboxes in the city with SAIC and FAW. The German carmaker also runs a platform spare parts venture in Changchun with FAW.

"We have confidence to grow our China sales and profit this year," Vahland said, without providing specific targets.

Volkswagen's sales in China jumped by 24.3 percent year-on-year to 711,298 units in 2006, keeping its leadership in the nation's passenger car segment.

Last year, the group regained profit in China thanks to the strong sales growth and its aggressive cost-cutting efforts, after posting losses in the previous two years.

Sales of China-made vehicles climbed by a quarter to 7.22 million units last year, including 4.2 million passenger cars, according to industry data.

Vehicle sales this year are forecast to reach 8.5 million units and passenger cars surpassing 5 million units.

(China Daily March 31, 2007)