German auto giant Volkswagen said its aggressive expansion in China is not under threat despite strong warnings of excessive car production capacity in the nation.

An FAW VW company executive said last week that the sales of Audi's luxury A6 sedans grew by nearly 50 per cent on a yearly basis during the first three quarters of the year. [File Photo]

"We face no risks in China as our joint ventures with Chinese partners have a deep understanding of the development of the market," said Bernd Pischetsrieder, chief executive of Volkswagen.

Volkswagen, the first foreign automaker to assemble passenger cars in China, now operates two car joint ventures with the First Automotive Works Corp (FAW) and Shanghai Automotive Industry Corp (SAIC)- the nation's top two vehicle manufacturers.

"China is the world's fastest-growing car market and it will continue to grow rapidly in the years to come. However, if its production capacity expands too fast, there will probably be risks," Pischetsrieder said.

Total vehicle manufacturing capacity in China will exceed 14 million vehicles by 2007 as a result of huge investment of domestic and foreign automakers, but annual demand will only reach 7 million units by then, according to a report from the National Development and Reform Commission, the main watchdog of the country's auto industry.

"We will carry out a long-term and sustainable development strategy instead of merely pursuing short-term results in China," Pischetsrieder said.

Volskwagen plans to add a total investment of 6 billion euros (US$6.8 billion) and to double its annual production capacity to 1.6 million units in China within the next five years to maintain its leadership of the nation's passenger car market.

"But our most important target in China is not to keep the market share, but to continue to lead in the market through collaboration with our joint venture partners," Pischetsrieder told China Daily.

"Many of the world's other major automakers have announced their market share targets in China, but not all of them will be able to achieve their targets," he said.

Other companies, such as General Motors, Ford, Toyota, Honda and PSA Peugeot Citroen, which have already set up one or more car joint venture in China, are also aggressively speeding up investment in the market, challenging Volkswagen's dominance.

"The current competition scenario in the United States (the world's largest and most competitive auto market) will take place in China after 10 years," he added.

The company's two joint ventures in China sold some 500,000 cars during the first three quarters of this year, according to Zhang Suixin, managing director of Volkswagen (China) Investment Co. Ltd.

Total sales are expected to reach 700,000 units this year, up from more than 500,000 units last year, Zhang said.

"We will further cut production costs in China by using more locally-made components and will continue to introduce new models in China, including those to be jointly developed with our Chinese partners and specially for the market," Pischetsrieder said.

China's total vehicle output is forecast to exceed 4 million units this year, including 1.8 million passenger cars.

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