Inchcape Retail is due to relocate its Chester Volkswagen dealership in summer 2013 into a larger property.
Construction group Robertson has won the contract to convert a former Boots distribution warehouse off Sealand Road in Chester into the new showroom.
The £3.9m project will include the demolition of existing offices and part of the warehouse, before extending and re-cladding the building and fitting it out to the latest VW corporate standards.
The four-acre site will become a metro regional centre for Volkswagen, with a 17 new car display, 100 used car area and 23 bay service centre.
It will also have a bodyshop for VW, Audi, Mercedes-Benz and Land Rover.
Robertson regional managing director Andy McLeod said: "We have successfully completed a number of projects for Inchcape in the North East of England and are looking forward to successfully delivering a project for them in the North West."
Work is due to be complete in early summer 2013.