The German automaker's joint venture with FAW Group Corp. will operate the $624 million plant. The facility, VW's 10th Chinese plant, will produce as many as 300,000 vehicles per year.

Construction will begin at the end of this year. The 170-hectare site will include a stamping plant, body shop, paint shop and final assembly unit. The factory will employ 4,000 workers.

The Foshan plant will be VW's first assembly plant in southern China, where its sales have lagged behind Japanese rivals Toyota, Nissan and Honda. The German automaker has not confirmed rumors that it is considering a second plant in southern China with Shanghai Automotive Industry Corp., its other joint-venture partner.

The Foshan plant is part of VW's $7.2 billion strategic plan to expand production and introduce new models in China. By 2012, VW says it will have introduced 20 new models.

By 2013 or 2014, VW also plans to launch production of electric vehicles in China. And in that same time frame, VW plans to double its annual production capacity in China to 3 million units.

In the first five months of 2010, VW sold 778,000 vehicles in China, up 48 percent over the year-earlier period.