BYD already has a plant in Xi'an, which has an annual capacity of 200,000 units. It also runs a plant in the south China city of Shenzhen capable of making 200,000 vehicles a year.

The company also says it will build a new engine plant with maximum output of 600,000 units per year in Xi'an alongside the car plant project.

Constructions of the new car and engine plants will start in October this year. Total investment in these facilities is projected to be about 5 billion yuan ($732 million).

After the new car plant becomes operational, its car production capacity in Xi'an will increase to 500,000 units by 2012 and to 600,000 in 2013.

BYD said its new plant will build models with product codes of F2, L3, F5 and M3, without providing further details on these models. According to information from the Xi'an government, BYD will produce nearly all components by itself in the new plant except tires and glass.

BYD started building cars in 2005. It sold 173,514 units of passenger vehicles in the first half of this year in China, up by 172 percent year-on-year, according to Automotive Resources Asia, a unit of J.D. Power and Associates.

Although the company does not produce commercial vehicles now, last month it bought a bus maker in the central China province of Hunan and is planning to produce electric buses and minivans.