The Foshan-based factory will take Volkswagen’s production capacity in China to three million vehicles by 2014 – double its current output – as the German manufacturer invests six billion euros ($8.7 billion) in its Chinese operations.
China overtook the US as the world’s largest new car market for the first time in 2009 and has shown no signs of slowing in 2010.
Passenger car sales increased 26 percent year-on-year for May, leaping to 1.04 million for the month. Year-to-date sales for the first five months of 2010 are up 55 percent to just under 5.7 million vehicles.
Volkswagen’s sales compare closely with the industry average, with China’s largest overseas manufacturer gaining 48 percent for 778,000 sales for the year to date.
Volkswagen CEO, Martin Winterkorn, said growth in China was crucial to the expansion and success of the VW brand.
“China has become the Volkswagen Group's largest and most important sales market. We intend to continue above-average growth,” Mr Winterkorn said.
Commerzbank analyst, Daniel Schwarz, told Bloomberg that Volkswagen’s expansion into the booming industrial regions of China’s south was an important step for the brand.
“Volkswagen is trying to catch up in the south where they currently aren't as strong as further north. In the mass segment you have to do the value creation inside China,” Mr Schwarz said.