BRACING itself for more competition in the coming years, China's most profitable car-maker is working on plans to upgrade its operations. Shanghai Volkswagen (SVW), a German-Sino joint venture, is in talks with mainland car authorities to set up the first car research and development centre to develop new models in the country. 'We're discussing with the Chinese authorities on the possibility of setting up a research and development centre,' said Martin Posth, Volkswagen Asia-Pacific chairman and president. He said the proposed centre would serve the group's car ventures in Shanghai and Changchun and would probably be set up in Beijing once approval was secured. SVW - which has just come up with a new model, Santana 2000, specifically designed for the Chinese market - wants to make more domestically-styled models over the coming years to meet demand and a policy requirement on domestic content. Its other joint venture in China is the First Automobile Works-Volkswagen, which makes City-Golf and Jetta cars and produces Audi cars under licence. About 59 per cent of private cars made in China are Volkswagen group products and if imports are included, the group has nearly 51 per cent of the market. But analysts said that comfortable position might be difficult to maintain when other motor giants received the go-ahead to produce more passenger cars and minivans. Chrysler, Mercedes-Benz and Ford are involved in a tussle for a US$1 billion deal to produce multi-purpose vans in Guangdong.