(June 10, 2010) Volkswagen will build a new plant in southern China, doubling production capacity in the country as car demand booms.

The factory in Foshan, Guangdong province, will have capacity to assemble 300,000 vehicles a year and will open in 2013, VW said in a statement Wednesday. VW's production capacity in China will double to 3 million vehicles within four years as the carmaker invests $7.2 billion.

Automakers are expanding in China, which surpassed the United States as the largest auto market last year, as demand soars.

Daimler AG, the world's second-largest luxury carmaker, announced plans last month to build an engine factory in China as part of a 3 billion-euro investment there.

“Volkswagen is trying to catch up in the south where they currently aren't as strong as further north,” said Daniel Schwarz, an analyst at Commerzbank AG in Frankfurt. “In the mass segment you have to do the value creation inside China.”