"We are cautiously optimistic that the worst effects of the crisis will be behind us in two to three months," said Stephan Woellenstein, head of Volkswagen's China business.

Demand was still limited, Volkswagen said, adding it was prepared to ramp up capacity at its plants in the country, 22 of which had resumed production. Two vehicle plants in Changsha and Urumqi are still closed, the carmaker said.

Woellenstein said he expected vehicle sales of up to 1 million in March, up from 250,000 in February.

"There are more and more signs that business is recovering. By the middle of the year, we could be back to last year's planning. Hope is returning on the Chinese market," Woellenstein said.

In 2020, Volkswagen expects a decline of 3-15% in the Chinese market but confirmed plans to invest more than 4 billion euros ($4.4 billion) this year there, with about 40% of that sum earmarked for electric driving.

"We assume that the recovery will continue and that we will be operating in a normal market environment again in 2021," Woellenstein said.

Volkswagen plans to sell 1.5 million electric cars in China per year from 2025.

($1 = 0.9093 euros)

(Reporting by Christoph Steitz; Editing by Mark Potter)