Volkswagen has reportedly received approval to construct a new plant in western China's Xinjiang region, but the German auto giant said it has not yet decided to go ahead with the project.

According to the ifeng.com website, the Xinjiang economic planning commission on November 24 granted Volkswagen the authorisation to go ahead with factory construction.

If Volkswagen decides to build the two billion yuan ($316 million) factory, production could begin as early as 2013, with the annual capacity reaching 50,000 automobiles by 2016, ifeng said.

But the German car maker said no decision has been made on the project.

"Shanghai Volkswagen already has two automobile factories and two component factories in the Shanghai region. Another additional factory is being constructed," Volkswagen said in a statement.

"Due to the continued growth of the Chinese automobile market, we are always examining market opportunities, including in western China. Regarding this proposition, we still have not made a decision."

Shanghai Volkswagen saw its automobile sales in China, the biggest car market in the world, surpass one million units in the first 11 months of the year.

According to ifeng, there is a large potential for growth in car sales in Xinjiang as automobile ownership there lags far behind China's eastern seaboard, but the region also lacks sales and service networks.