The German automaker said it would use the fresh investments, coming primarily from its two Chinese joint ventures, for launching new products and local capacity expansion.

"China is one of Volkswagen's most important markets and we are the market leaders there," said CEO Martin Winterkorn. "Demand for our products is growing so fast that our capacity is no longer sufficient."

Volkswagen plans to invest 1.3 billion euros to increase production at its Nanjing facility to 300,000 units per year and at its Chengdu plant to 350,000, with three new models set to roll out of Nanjing and two out of Chengdu by 2012.

"We expect to achieve double-digit growth in China this year and to secure our market leadership going forward," said Winfried Vahland, president and CEO of Volkswagen Group China.

He said Volkswagen is "on the track" to achieve its goal of doubling annual sales to 2 million units by 2018 ahead of schedule.

Volkswagen sold 652,222 vehicles in China in the first half of this year, 22.7 percent higher than the same period in 2008.