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By Norihiko Shirouzu

BEIJING (Reuters) - Volkswagen s luxury division Audi plans to sell about half a million cars this year in China, the world s biggest auto market, and raise the number of its Chinese dealers to 500 by 2017.

The German automaker hopes its car sales will exceed 500,000 this year, executives told reporters on Friday before the Beijing auto show, which opens on Sunday.

Foreign auto makers, such as General Motors Co and Toyota Motor Corp 7203.T , and domestic players such as SAIC Motor Corp 600104.SS have been competing aggressively in China, where rising affluence is boosting car ownership.

This country has an increasing number of mega cities, Audi Chief Executive Rupert Stadler said, naming Beijing, Shanghai and Guangzhou as examples. In these three areas, there are as many people as, for example, in Germany.

In 2013, Audi sold 488,000 vehicles in China and a total of 492,000 including Hong Kong. Executives said it aimed to take advantage of the increasing popularity of SUVs and rising demand for compact premium cars.

China s auto market is expected to grow 8-10 percent this year, easing from last year when it expanded 13.9 percent to 21.98 million vehicles.

Audi is stepping up efforts to unseat German rival BMW as global luxury-car sales leader.

Recovering European demand and Chinese growth pushed its deliveries to a record in the January-March quarter.

Audi s total deliveries rose 11.7 percent to 412,850 cars, with a 21 percent gain in China after the carmaker started assembly of the A3 sportback model at a factory in Foshan in late 2013.

(Writing by Lee Chyen Yee; Editing by Ruth Pitchford)

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