Volkswagen announced on Thursday plans to invest 2.5 billion euros ($2.68 billion) in China to expand its production and innovation hub in the city of Hefei in Anhui Province.

Preparations are also being made for the production of the two Volkswagen brand models being developed together with Chinese partner XPENG to begin in 2026, it said.

Ralf Brandstaetter, Volkswagen Group's management board member for China, said the Hefei site would help bring technologies to market around 30% faster as the carmaker boosts electric vehicle production there.

Volkswagen ceded its title of best-selling car brand in China to local EV manufacturer BYD in late 2022 and has announced a series of new models to electrify its portfolio in China as it battles to regain ground.

($1 = 0.9320 euros) (Writing by Rachel More, Editing by Victoria Waldersee, Editing by Madeline Chambers)