Volkswagen is investing 2.5 billion euros ($2.67 billion) in China as the German car group celebrates its 40th anniversary in the world's largest vehicle market.

The investment will be spent on expanding its production and innovation hub in Hefei, Anhui province, said Volkswagen on Thursday.

"Our new production and development hub in Hefei will bring technologies to market around 30 percent faster in the future.

"This additional investment in the site underlines our ambition to quickly expand our local innovative strength," said Ralf Brandstaetter, a member of the board of management at Volkswagen AG for China.

The investment is also to be spent on preparing the production of two models codeveloped with Xpeng.

The first model will be a mid-size SUV, whose production is scheduled to start in 2026 at Volkswagen Anhui, one of the carmaker's latest Chinese joint ventures.

At the core of the innovation hub in Hefei is Volkswagen (China) Technology Co, which is the German carmaker's largest development facility outside Germany.

The facility is capable of developing new vehicles from scratch, involving design, test, validation and approval.

VCTC is the "central unit "responsible for product localization, said Volkswagen. In close collaboration with joint ventures, it has taken on central development tasks.

The facility is also developing the first China-specific electric architecture, called the China Main Platform. Using this, at least four models for the entry-level segment in the compact class will be built from 2026.

"They will be highly competitive," said Brandstaetter, when asked about the vehicles on its China-specific electric vehicle platform.

"We have set our target to remain the No 1 international carmaker in China … and a top three player in the country by 2030," he said.

By 2030, Volkswagen will offer more than 30 all-electric models in the Chinese market.

The German car group established its first joint venture, SAIC Volkswagen, in 1984.

Today, it has around 50 million vehicles on Chinese roads bearing its brands, ranging from Volkswagen and Audi to Porsche and Bentley.

Volkswagen now has 39 plants in China. It offers around 160 passenger car models in the country and has built an extensive retail network of more than 3,500 dealers.

It has partnered with Chinese high-tech companies, including Horizon Robotics and ThunderSoft, to offer the latest in-cabin features. More than 90,000 employees work for Volkswagen in China, making it the largest European employer in the country.