With its joint venture partner Brilliance Auto, the automaker started construction on the new plant in the capital of Liaoning province in the middle of last year. At the time the announced investment was 560 million euros ($795 million).

The additional investment will be shared between the two partners and used to build press and paint shops and to expand infrastructure at the new plant in Tiexi district of Shenyang, the company said in a statement.

The new factory will have an initial capacity of 100,000 cars a year when it is completed early next year, according to BMW. Planned products made at the facility include the X1 SUV.

"The plant is being built in record time," Olaf Kastner, president and CEO of the joint venture BMW Brilliance Automotive, said in an interview at the Shanghai auto show last month. "We have never before built a plant in such a short time - 18 months."

BMW has an existing factory in Dadong district of Shenyang that makes a total of about 75,000 3 Series and 5 Series sedans annually.

The figure is set to increase to more than 100,000 in the near future, the company said.

Over the long term, the two plants will have the combined potential to make more than 300,000 vehicles a year "depending on market trends", the company said.

Kastner noted in the previous interview that the company will remain flexible "so we can raise production - but if necessary we can also scale back".

That flexibility will give the company a competitive edge, he added.

Last month BMW sold 20,800 cars in China, a year-on-year increase of 67 percent. For the first four months, the company reported deliveries of nearly 80,000 cars, up 70 percent over the same period last year.

China is BMW's third-largest market following Germany and the US.

Other luxury carmakers are also adding capacity as demand increases.

Audi now has an annual production capacity of 200,000 units in China at its joint venture with parent Volkswagen Group and local partner FAW Group.

It has announced plans to double capacity to 400,000 units as it aims to move 1 million cars in total from 2011 to 2013.

The luxury unit of Volkswagen sold 23,800 cars in China last month, up 22 percent over the same period last year.

Mercedes-Benz aims to boost production capacity in its Beijing joint venture to 300,000 units a year by 2015.

The company's mainland sales surged 77 percent to more than 61,000 cars between January and April this year. It moved 17,180 cars in April alone.

But outside the premium segment, the industry is under pressure.

In April, sales fell for the first time in the last two years in both year-on-year and month-on-month figures.

The 1.55 million vehicles sold in China last month was a decline of 15 percent from March and 0.25 percent fewer than the same month a year ago.

The nation's auto sales in the first fourth months totaled 6.5 million units, up 6 percent over a year earlier.