As the leading automaker in China, Volkswagen benefits the most from the robust economic performance of the Asian power that is now largest market for cars.

The German auto giant, with total global revenues second only to Toyota, doubled its operating profit for the second quarter to nearly 2 billion euros. The results for the first half of 2010 -- announced on Thursday -- significantly exceeded the expectations of analysts and the company itself.

The main driver of the company's growth has been the rapid expansion of the Chinese auto market, where Volkswagen has sold over one million units in 2009 under the three brand names: VW, Audi and Skoda.

While China´s economy is achieving record growth rates of around 10% each year, the automotive industry is growing even faster. According to Kenichi Amaki from Matthews International Capital Management the percentage of GDP represented by the auto industry grew from 1.8 percent in 2006 to 2.3 percent in 2009.

With approximately 80 different manufacturers now, the market also became more competitive, says Amaki, but adds that there is still plenty of room to expand: China’s average level of car ownership is still only at 47 cars per 1,000 people, compared to the global average of 140 cars. With this perspective the goal formulated by Volkswagen CEO Martin Winterkorn to reach yearly sales of 2 million units even before 2018 seems realistic.

In order to create the necessary capacities for expansion in sales, Volkswagen plans to invest 4 billion euros in the next two years, constructing two new car factories. The carmaker was one of the first to establish operations in China in 1984 and is working together with two different joint-venture partners, FAW and Shanghai Volkswagen Automotive (SVW). But lately, Volkswagen and other foreign carmakers have been challenged by domestic automakers like BYD which are growing faster and gaining market share.

The Chinese market as a whole faces challenges as well, at least temporarily.

The demand for cars is already showing a slow-down which is expected to persist in the second half of 2010 by several companies and analysts like Amaki.

At the same time, labor issues that have surfaced at some parts suppliers for Japanese and Korean automakers -- for example, forcing Honda to halt production in one of its Chinese factories -- will compel suppliers to spend more capital to automate their production.

However, in the bigger picture these hurdles seem rather insignificant.

Nearly every company is announcing record sales and results. Nissan and Hyundai Motors also reported their numbers on Thursday, with the Korean carmaker achieving its best quarterly net result ever, rising by 71 percent to $1.2 billion. Meanwhile, Nissan recovered from the recession and experienced its best quarter in two years by posting a profit of nearly $2 billion.

For Volkswagen, China´s automotive market is the declared battleground to overtake Toyota, in order to become the worlds largest car maker.