SVW was formed in 1984, as a joint venture between Volkswagern and SAIC. This was a 25-year contract to make passenger cars in Shanghai with a limit of 50 per cent foreign ownership.
SVW Shanghai plant was by the far the winner among all new JVs, as it produced cars that could function as taxis, vehicles for government officials and transport for the newly emerging business elite. As car imports fell to some 34,000 in 1990, Shanghai-Volkswagen’s (SVW’s) production of its Santana models reached nearly 19,000 vehicles that year. By 1993, SVW’s output had reached 100,000 vehicles. Volkswagen was aided by some Shanghai municipal efforts. Various restrictions on engine size, as well as incentives to city taxi companies, helped ensure a safe market in the company’s relatively wealthy home arena. Volkswagen also encouraged its foreign parts suppliers to create joint ventures in China, and their resulting product helped SVW achieve an 85 per cent local content rate by 1993.