German auto giant Volkswagen has decided to build a factory in Changsa, Hunan province, China. This was confirmed by Frankfurter Allgemeine Zeitung and the factory would have an annual capacity of 300,000 vehicles.

Joining Volkswagen in the venture is SAIC and it is projected that the production would commence as soon as 2016 according to the German newspaper.

A formal announcement as to the plan would be made as soon as Wednesday.

The decision comes as the meteoric growth of China's passenger car market continues to grow and in that growth Shanghai Volkswagen Automotive Co Ltd would commence. Shanghai Volkswagen is a joint venture between Volkswagen AG and the Shanghai Automotive Industry Corporation.

The local Volkswagen unit registered a huge growth in sales volume in 2012 and the proposed factory would cost nearly 12.08 billion yuan. At full operational capacity, the annual capacity of Shanghai Volkswagen would increase from the current 1.75 million units to more than 2 million starting 2016.