Volkswagen will build a new factory in Foshan, China, which is in line with plans to double production in the world’s largest auto market to 3 million vehicles per year by 2013/2014, as announced by chairman Martin Winterkorn. Construction of the plant will begin at the end of this year on a 170 hectare plot of land.

When it’s ready to function in mid-2013, the facility will employ around 4,000 people to achieve an annual production capacity of 300,000 units. VW and its Chinese joint venture FAW-Volkswagen will pour in 520 million euros into this project.

Europe’s biggest automaker, together with local partners FAW-Volkswagen and Shanghai Volkswagen, have nine plants in China churning out 20 VW, Audi and Skoda models. VW is betting heavily on China, recently announcing that it will boost investment in China operations by 1.6 billion euros to 6 billion euros.

It has plans to launch seven new or locally produced models this year, to make a total of 20 new models by 2012. Wolfsburg also wants to produce electric cars there by 2014. In the first five months of the year, the Volkswagen Group has sold around 778,000 vehicles in China, a 48% increase over the same period last year.

VW will be smart to take note of recent developments in Foshan, where Honda’s exhaust supplier is facing a labour strike demanding for higher pay.