German auto giant Volkswagen Group aims to produce 2 million cars annually by 2007 or 2008 in China, the world's fastest-growing car market.

Folker Weissgerber, a board member of Volkswagen, revealed the target to China Daily yesterday at a ceremony to mark the millionth car produced by FAW VW, its joint venture with First Automotive Works Corp (FAW) in Changchun, in Northeast China's Jilin Province.

The target is much higher than Volkswagen's previous plan announced at the beginning of last year that it aims to sell more than 1 million cars in China a year by 2007.

Last year, Volkswagen sold 694,000 cars in China, up from 510,000 units in 2002.

"We expect FAW VW to produce 1 million cars by 2007 or 2008," said Weissgerber.

FAW VW, established in 1991, produced 302,000 cars last year, an increase of 58 per cent from a year ago.

Its sales surged by 55 per cent year-on-year to 298,000 cars last year, including 143,132 Jettas, 78,068 Boras, 15,525 Golfs and around 62,000 Audi A6s and A4s.

The strong sales, controlling 14.2 per cent of China's car market last year, keep FAW VW the second largest Sino-foreign carmaker in China after Volkswagen's other joint venture in Shanghai, which sold 396,000 cars last year.

The Jetta has became the best-selling single model produced in China.

The joint venture posted 16.2 billion yuan (US$1.95 billion) in pre-tax profits last year.

FAW VW produced its No 500,000 cars in February 2002.

Echoing Weissgerber, FAW President Zhu Yanfeng said: "I believe there will be a ceremony for the millionth car of FAW VW every year in the near future with the completion of its second car plant."

FAW VW started to build a second car plant with an annual capacity of 330,000 units last July. The new plant will be put in operation next year.

"The joint venture's ouptut this year will reach at least 330,000 cars," said Weissgerber.

An official of FAW VW said the insufficient production capacity is one of the biggest bottlenecks against its expansion this year.

FAW VW's existing plant has an annual capacity of more than 300,000 units.

The joint venture will increase production of key components greatly with the next decade, according to Weissgerber.

"We have very positive expectations for China's total car market and our business development here, although we have more and more competitors after China's entry into the World Trade Organization," he said.

Other world's major automakers are also stepping up their expansion in China, challenging Volkswagen's leadership in the market.

On Tuesday, French carmaker PSA Peugeot Citroen and China's Dongfeng Motor Corp announced they will add an investment 600 million euros (US$759 million) to double production capacity of their joint venture to 300,000 cars by 2006.

Japan's Toyota has also formed a strategic alliance with FAW to produce 400,000 cars in China annually by 2010.

Total passenger car output in China last year was estimated to reach more than 2 million units, an increase of 80 per cent from a year earlier.

However, analysts say car output in China will slow down and the car industry has been overheated as many domestic and foreign companies are heavily investing to build new capacity.

"Domestic car output will grow by some 50 per cent this year from last year," said Jia Xinguang from the China National Automotive Industry Consulting and Development Corp.

Volkswagen forecasts China's car market will grow by the average 10 to 15 per cent annually in the next two decades.

Stressing FAW VW's contribution to FAW's development strategy, Zhu said: "FAW is expected to produce more than 1 million vehicles this year."

FAW's total vehicle output grew by 33.21 per cent to 900,000 units last year, controlling 21 per cent of China's total vehicle market.

The company aims to increase its annual output to 2.07 million units by 2008.

FAW also co-operates with Japan's Mazda to produce passenger cars.

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