Encouraged by stronger-than-expected performance this year, Sino-German joint venture Shanghai Volkswagen Automobile Co expects its annual sales to hit one million cars over the next year or two.

"I believe our annual sales will reach one million units within two years at most according to our current momentum," said Zhang Hailiang, executive director for sales and marketing at the biggest passenger car producer in China, during an interview at the ongoing Guangzhou Auto Show.

The 50-50 joint venture between Volkswagen Group and SAIC Motor Co Ltd expects to move around 700,000 cars this year, up from 501,000 units in 2008, Zhang said.

In the first 10 months of 2009, Shanghai Volkswagen's sales surged by 41.1 percent year-on-year to 585,200 vehicles, he said. The number included 489,500 Volkswagen-brand cars and 95,700 units under Czech brand Skoda, up 31.8 percent and 91.5 percent respectively.

The joint venture said in a statement that it plans to launch more than 10 all-new and upgraded models under the Volkswagen and Skoda badges over the next two to three years, believed to be its most intensive period for new product introduction since the company was formed in 1985.

In 2010, the joint venture plans to offer three new products - an SUV, a subcompact and a compact model, it said. Zhang said the mid-sized Tiguan will be Shanghai Volkswagen's first SUV. It will hit the market at the beginning of next year.

"We have localized the Tiguan a lot, such as its long wheelbase and new front design, to meet local demands better. And I believe it will enjoy good sales," Zhang said. Chinese buyers favor roomier cars when they choose among the wide range of comparable models now available.

The Tiguan will have two engine options - 2-liter and 1.8-liter TSI (turbocharged stratified injection) - as part of Shanghai Volkswagen's efforts to equip more of its lineup with TSI engines and state-of-the-art DSG transmissions to further sharpen their competitiveness in fuel economy, he said.

About half of the joint venture's models will come with the TSI-DSG package within two years, according to the company. Currently, only two of its nine models - the Skoda Octavia Mingrui compact and Superb Haorui mid-size - have TSI engines, which generate more power and save fuel through highly efficient combustion.

The joint venture is also making the Volkswagen Santana, Passat Lingyu, Lavida, Polo and Touran as well as Skoda Fabia Jingrui. It introduced the Skoda brand in 2007.

Zhang said the joint venture's two brands are complementary even though they sometimes sell in the market same segments. "Volkswagen is a mighty brand, while Skoda is a young, dynamic and growth brand. They are developing amid balanced and healthy competition."

Skoda now accounts for 16.3 percent of Shanghai Volkswagen's sales, a ratio the marketing director expects to be much higher in the future through strong growth in the brand.

Zhang predicts the passenger car market in China will grow by 13 to 15 percent next year, with country's economy expected to remain solid.

In the first 10 months of this year, sales of passenger vehicles in China rose by 38 percent from a year ago to 6.9 million units, according to market data. Full-year passenger vehicle sales are projected to reach 8 million units.

Shanghai Volkswagen now has more than 700 sales and service outlets, with 231 for the Skoda brand, the biggest sales force among all carmakers in China.

The joint venture now has factories in Shanghai and Nanjing, Jiangsu province, with a combined production capacity of more than 660,000 units a year.

Propelled by the robust sales and an improving product mix, Shanghai Volkswagen said without revealing a specific figure that its profits have accelerated onto the fast track.

The joint venture said almost two-thirds of its sales in the first 10 months were generated from its most lucrative models, such as the Passat Lingyu, Lavida and Skoda Octavia Mingrui.

From January to October, sales of the Lavida rocketed by 362.6 percent to 116,000 units, making it one of the best-selling models in the compact segment. Monthly sales of the mid-sized Passat Lingyu were almost 9,000 units.

In the first 10 months, more than 70,000 Skoda Octavia Mingrus rolled out of the showrooms, while monthly deliveries of the Skoda Superb Haorui, just launched in August, have surpassed 3,000 units.

Shanghai Volkswagen said its strong performance has contributed greatly to blistering profit growth of its parent, Shanghai-listed SAIC, the biggest Chinese motor group. It posted 3.97 billion yuan in net profits in the first three quarters of this year, a surge of 78.52 percent from a year earlier.

The share price of SAIC has shot up to more than 25 yuan from less than 6 yuan at the beginning of this year.