VW, PSA to invest $1.5 bln in south China-Xinhua

Volkswagen AG (VOWG.DE), PSA Peugeot-Citroen (PEUP.PA) and other automakers will invest more than 10 billion yuan ($1.52 billion) in manufacturing capacity in China's Guangdong province this year, Chinese state media reported on Sunday.

Major greenfield projects lined up in the southern Chinese province include Volkswagen's car plant with Chinese state-owned FAW Group and a joint facility between Peugeot and China Changan Group, said a Xinhua report citing the local economic planner.

Toyota Motor (7203.T) and Honda Motor (7267.T), which have their manufacturing base in Guangdong, are expanding their vehicle and engine plants, said the report.

The investments will boost the province's carmaking capacity, which at the end of 2010 came to 1.32 million vehicles, ranking second in the country and equivalent to about 9.5 percent of China's 2010 overall car output.

Global industry giants saw strong car sales over the past two years in the world's biggest auto market, where growing wealth has pushed auto sales to record highs.

But growth in the once-booming market is slowing to a more rational pace of 10-15 percent this year after the government scrapped most of its market incentives.

Nevertheless some carmakers including General Notors (GM.N) are considering adding capacity.

($1=6.591 yuan)