Shanghai Volkswagen will recall 7,544 vehicles whose flawed design could cause drivers to lose steering control, China's quality watchdog said on its website on Friday.

The problem affects Santana 1.8L manual-series sedans made between March 1 and August 28.

"In extreme circumstances, there is a risk of loosening, which might lead to a vehicle steering failure," said the General Administration of Quality Supervision, Inspection and Quarantine.

The recall comes as Volkswagen is reportedly preparing to boost its production capacity in China, already its largest market ahead of Germany.

The group plans to increase to four million vehicles by 2018, up from three million by 2014, its China chief Jochem Heizmann was quoted as saying in the online version of the German news magazine Focus.

The group delivered 2.3 million vehicles in the China region in the 2011 fiscal year and reported a pro rata operating profit there of 2.6 billion euros ($3.3 billion), it said at the time.

Volkswagen announced a shake-up in June to focus more on the Chinese auto market, which is the world's largest.