The 640,000-square-metre factory is the fourth factory in China for Shanghai Volkswagen, a 50-50 joint venture between Europe's largest automaker and Chinese manufacturer SAIC. The partners bought a plant formerly run by a joint venture of Italian carmaker Fiat.
The factory is meant to meet rising demand for cars in China, VW said in a statement. VW hopes to sell more than a million cars in China this year and plans to build its Santana Vista model in the new Nanjing plant.
The Nanjing factory will employ about 1,200 people. Shanghai Volkswagen has said production is expected to reach 100,000 vehicles by 2010.