Europe's largest automaker plans to break ground for the factory on July 15 in Changchun - capital of Jilin Province - where it has already been running a joint venture, company officials said, declining to give more details.

Volkswagen and FAW's 11 billion yuan (US$1.3 billion) venture in Changchun, FAW Volkswagen Automotive Co Ltd, now makes Jetta and Bora models and Audi brand cars.

The new plant will be able to make 300,000 cars a year. The existing plant is also considering expanding capacity by 30,000 to 330,000 units, FAW VW spokes-woman Wang Miye told Bloomberg News.

Volkswagen, which will spend more than 1 billion euros this year in China, was mulling on plans to build a new plant in the country because of its insufficient production capacity compared with market demand, according to Zhang Suixin, managing director of Volkswagen (China) Investment Co.

China, now VW's second-biggest market, is a key part of the German firm's growth strategy.

The company saw sales of its products leap 62 percent to 270,495 cars in the first five months of 2003 here.

Volkswagen now runs two joint ventures in China. Its venture with Shanghai Automotive Industry Corp makes the Santana, Passat, Polo and Gol models.

Shanghai Volkswagen Automotive Corp, China's first Sino-foreign car company, said earlier that it plans to shift part of its production to neighboring Jiangsu Province so that it can have capacity to produce new models in its local plant.

The Shanghai venture is poised to outsource the production of its Santana sedans to a plant of Shanghai Automotive in Yizheng city in the near future, company officials said.

Volkswagen aims to sell 600,000 cars in China this year, up from 513,000 in 2002, helped by the launch of new and revamped models including the Golf hatchback and a new version of the smaller Shanghai-built Polo.

The company's total output in China will exceed 1 million units by 2007.

Domestic automakers are vying to increase production in the world's fastest-growing car market, stimulated by the stunning 56-percent growth in car sales last year.

Earlier this week, General Motors Corp said that it would invest 2 billion yuan in an effort to double capacity at a 5-year-old plant in Shanghai, raising maxi-mum output by an additional 100,000 cars a year.

(eastday.com July 5, 2003)