Volkswagen expects China to overtake Germany as its biggest market this year.

"I take the Chinese market as our second home market. My estimation is that Volkswagen's sales in China will overtake that of Germany's this year," said Martin Winterkorn, CEO of Volkswagen AG.

Last month, the German carmaker sold 112,466 cars in China, breaching for the first time the 100,000-unit mark for single month sales.

All three locally produced brands - Volkswagen, Audi and Skoda - recorded their strongest sales in March. The company said it sold 92,969 Volkswagens, 11,848 Audis and 7,610 Skodas in the country last month.

"The development of the total passenger car market in the first quarter has exceeded our expectations and we benefited successfully from this growth trend," said Winfried Vahland, president and CEO of Volkswagen Group China.

"With our performance, we have created a respectable base for future growth. We have corrected our forecast for 2009 and have raised our production planning by an additional 50,000 units."

Volkswagen will invest $1 billion in China in 2009-10. The money will be used for new technologies, introduction of new products, brand building and sales channel upgrades, said Winterkorn.

Vehicle sales in China climbed to a record level in March helped by government measures such as lower purchase taxes, according to data released last week by the China Association of Automobile Manufacturers (CAAM).
 
CAAM said that a total of 1.10m vehicles were sold last month, up from 1.06m units in March 2008.
 
The gain comes in spite of slower growth in the Chinese economy which is feeling the effects of lower exports, most notably to the US.
 
China's government has reacted quickly to reduce the impact of economic slowdown on its auto industry with measures such as tax reductions on smaller cars and subsidies for farmers to stimulate demand in rural areas.
 
General Motors China said last week that its China sales in March rose 24.6% year on year to a monthly record of 137,004 vehicles.