MUNICH (Reuters) -Volkswagen will invest up to a billion euros ($1.2 billion) in artificial intelligence by 2030, feeding the technology into every area of its business in a bid to unlock billions in savings, the German carmaker said on Tuesday.

The announcement was made on the first day of the IAA car show in Munich, Europe's biggest, where European carmakers have gone on the offensive with electric model launches and technology revamps to combat Chinese competition.

Volkswagen's investment will go towards AI-supported vehicle development, industrial applications and the expansion of high-performance IT infrastructure, the company said in a statement, adding that the expected savings amount to up to 4 billion euros by 2035.

The German group is in the midst of deep changes in its two main markets of China and Germany as it steps back to work on new models, and major cost cuts are under way in Germany.

On Sunday, it unveiled a concept for a new small electric SUV, the ID.CROSS, part of the automaker's push to offer affordable battery-powered vehicles.

Volkswagen said AI would significantly accelerate the development process for new vehicle models and technologies.

"For us, AI is the key to greater speed, quality and competitiveness - along the entire value chain, from vehicle development to production," Hauke Stars, chief IT executive, said.

($1 = 0.8501 euros)

(Reporting by Rachel More, editing by Thomas Seythal)