The increased co-operation between the two firms includes provision to expand the main plant of the Chinese joint venture Shanghai Volkswagen (SVW) in Anting to produce electric vehicles.

“Today's agreement lays the foundation for the further expansion of our commitment to Chinese society and the environment. We have been at home in China for more than 30 years. Over the next four years, we plan to localize more than 15 different electric vehicle models in China, including plug-in hybrids and fully electric vehicles," said Prof Dr Jochem Heizmann, Member of the Board of Management of Volkswagen Aktiengesellschaft and president and CEO of Volkswagen Group China.

Under the deal, a new electric vehicle model based on Volkswagen's Chinese bestseller, the Lavida, is due to roll off the production line at the Anting plant around 2017, marking the first fully electric vehicle produced at the plant.

The deal also covers the production of a new C-segment VW model at the Anting plant, to the west of Shanghai, from 2016.

These agreements form part of the total investment of €22bn in China planned by the Volkswagen Group together with its joint ventures by 2019.