UPDATE 1-Volkswagen to build DSG transmissions in China

FRANKFURT, May 11 (Reuters) - Volkswagen will spend 400 million euros ($508 million) to start producing fuel-efficient DSG double clutch transmissions in China as part of a plan to reduce emissions of its locally manufactured fleet.

'The start of DSG production in China is a further important step for the Volkswagen Group China,' said its president and chief executive, Winfried Vahland, in a statement.

'Through the support of very advanced propulsion technologies we will come nearer to our goal of further expanding our market share while simultaneously reducing consumption and emissions of our vehicles.'

Volkswagen set a target three years ago to reduce fleet consumption and carbon dioxide emissions in China by 20 percent by 2010.

The carmaker plans to build the seven-gear DSG transmission in its Dalian powertrain site, where initially some 300,000 units will be produced before the capacity could be eventually doubled over time.

At the end of April, Volkswagen announced its two joint ventures in China were boosting their investment programme through 2012 by 1.6 billion euros to 6 billion altogether. This will be financed directly through the cash flow of the two JVs.

Next to Kassel in Germany, Dalian will be only the second Volkswagen plant that will assemble the DSG transmission, one of its best-known innovations of late.

(Reporting by Christiaan Hetzner) ($1=.7872 Euro) Keywords: VOLKSWAGEN/ ([e-mail]; Reuters Messaging: [e-mail]; [phone]) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.