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VW upbeat on China, plans more investments with JVs

A staff stands next to a Volkswagen Cross Coupe GTE hybrid SUV at the 13th China (Guangzhou) International Automobile Exhibition in Guangzhou, China November 20, 2015. REUTERS/Tyrone Siu

By Jake Spring

BEIJING (Reuters) - Volkswagen AG (VOWG_p.DE) is optimistic that its positive sales trend from the two previous quarters will continue in China, the world's biggest auto market, its China chief Jochem Heizmann said on Sunday.

Volkswagen (VW) plans to invest 4 billion euros ($4.49 billion) with its joint venture partners in China this year, while the expansion of its share of the sports utility vehicle (SUV) and new energy vehicle (NEV) markets will be a focus over the next several years, Heizmann told reporters ahead of the Beijing auto show beginning on Monday.

VW, whose China sales fell 3.4 percent last year to 3.5 million cars, has lagged in the country's SUV boom with relatively few locally produced models.

But it plans to change that with launches of 10 locally made VW-, Audi- and Skoda-badged SUV models in the years ahead.

"There is an SUV offensive on the way," Heizmann said.

"It will begin this year with a B segment SUV," he added, declining to give details on which joint venture or brand would produce that model. B segment refers to small cars.

On new energy vehicles, Volkswagen estimates that 2 million will be sold in the overall Chinese market by 2020, in line with the government's target, with the German carmaker selling a few hundred thousand.

VW aims to build 15 new plug-in hybrids or purely electric cars in China in the next three to four years and is taking steps to boost development of online connectivity in its models, Heizmann said at an evening reception, reiterating the plans may entail hiring another 30,000 people by the end of the decade.

The group has set up a so-called future lab in China to fuse digitalization experts with designers and enhance work on how people interact with their cars. The effort is also part of VW's push to reposition itself in the wake of its emissions scandal.

"In China, the future is on display now," the executive said. "VW is building a new world of mobility."

Heizmann also said VW is prepared for any recalls in China on any diesel-related issues, referring to the emissions test-rigging scandal last year when it came out that the automaker modified its cars to cheat emissions tests.

The company has been in talks with regulators globally on how to make amends. In China, the issue only affected roughly 2,000 cars.

Fallout from the scandal contributed to Volkswagen narrowly losing its crown as the top foreign automaker in China to General Motors Co (GM.N) in 2015, according to data from the China Automobile Makers Association.

(Reporting by Jake Spring, Jan Schwartz and Andreas Cremer; Editing by Anne Marie Roantree and Tom Heneghan)