SAO PAULO - Volkswagen, Europe's largest carmaker, plans to invest up to 6.2 billion reais ($3.5 billion) in Brazil from 2010 through 2014 as it aims to become the country's biggest carmaker, the company's Brazilian head said on Thursday.

The investment plans come as Volkswagen sees auto sales in Brazil reaching as high as 4 million units per year in 2014, a 33 percent increase from the current 3 million per year.

We're working to take the lead in the Brazilian market, but the focus is on growing in a sustainable way, Thomas Schmall said in Sao Paulo.

Emerging markets have picked up the slack for sagging vehicle sales in the United States, where the worst recession in about eight decades led automakers to slash production and seek money from the government to keep afloat.

Brazil has been a rare bright spot for global automakers, which are suffering much more in core markets like the United States and Europe.

Car sales in the country are on track to hit a record in 2009, boosted by government tax incentives that helped lower car prices and lure consumers to showrooms.

The tax breaks are set to expire at the end of December. The government announced this week plans to also help trim taxes on environmentally friendly cars in a bid to press for a faster renewal of Brazil's auto fleet.

The German carmaker aims to produce 1 million vehicles in Brazil by 2012, 39 percent more than last year, Alexander Seitz, its vice president of procurement in the country, recently told the local media.

Last week, Ford Motor Co unveiled plans to invest 4 billion reais to boost output in Brazil as record-low borrowing costs and a rapid economic recovery in Latin America's largest country stoke demand for new cars.

GM is another automaker that is expected to announce expansion plans before year-end.

Shares of Volkswagen fell 6.2 percent to 81 euros on Thursday, its third straight decline.

(Reporting by Alberto Alerigi Jr.; Writing by Guillermo Parra-Bernal; Editing by John Picinich)

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