German carmaker Volkswagen's premium brand Audi posted record-high margins, beating domestic rival Mercedes , and said it expected to stay ahead of the competition in fast-growing China.

Audi's volumes, revenue and operating profit all set a record in 2010 due mainly to China where sales moved to within 1,000 vehicles of its home market total.

We want to deliver more than 1.2 million Audi cars to customers worldwide during the current year, and thus build upon the success of the record year 2010, Chief Executive Rupert Stadler told reporters on Tuesday.

At the moment the only thing the competition (in China) is doing is chasing after us, and we expect it will stay that way.

It has taken 22 years for Audi to make its first 1 million sales in China. It plans to hit the 2 million mark over the next three years, Stadler said.

China and Germany each account for just over a fifth of Audi sales.

We are reaching the one or the other capacity limit (in China) and while we would like to better supply the demand there, the waiting times are already very long in Europe and other markets, Stadler said.

U.S. ASSEMBLY PLANT

The luxury carmaker may establish a U.S. assembly plant, and will decide in 2015, Audi of America President Johan de Nysschen told a news conference via webcast.

Speaking from the automaker's U.S. headquarters in Virginia, he said Audi U.S. sales would have to reach about 150,000 vehicles per year for an assembly plant to be warranted. He expects to attain that sales level soon after 2015.

Audi has not said whether a plant for the luxury automaker would be built at or near the Chattanooga, Tennessee, plant that is to begin producing Volkswagen Passat models in two or three months.

Audi expects its U.S. sales to rise to 114,000 vehicles in 2011, up 12 percent from last year. De Nysschen said sales in 2012 should reach 120,000.

In 2011, U.S. sales are expected to comprise about 10.5 percent of Audi's worldwide sales.

De Nysschen said TDI clean diesel powertrains will be introduced in U.S. models of the A8, A6 and Q5.

He also said that the 270 U.S. Audi dealers could sell more cars if they were available, saying the automaker is not availing ourselves of all market opportunities by having only about 30 days of supply of new vehicles.

CASH COW

Volkswagen may be looking to acquire full control of sportscar maker Porsche

, but it is Audi's success that has provided the cash to fund VW's recent spending spree.

Audi generated more than 3.5 billion euros fresh cash last year, lifting net liquidity by a quarter to 13.4 billion at the end of December -- a contribution of more than 70 percent to its parent's considerable war chest.

Audi said it aimed to keep its operating margin at the same record level this year as in 2010 when profitability increased 4 percentage points to 9.4 percent. Daimler-owned Mercedes recorded 8.7 percent last year, while BMW was expected to report less than 7.7 percent.

Finance chief Axel Strotbek said the industry had to cope with growing challenges.

We find ourselves faced with an increasingly high volatility in the relevant currency exchange rates and the price development for key raw materials is become harder to calculate, he said.

(Reporting by Angelika Gruber in Ingolstadt, Christiaan Hetzner in Frankfurt and Bernie Woodall in Detroit; Editing by Jane Merriman and Matthew Lewis)

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