VW Looks East

Not a single VW brand car will roll off the production lines at the factory near Pune to start with. The company is testing the water with a small Skoda model, aimed at the low-budget market, and then plans to add an Indian version of the VW Polo hatchback next year.

VW board member Jochem Heizmann stressed the importance of India for the company. He said the market had "enormous potential" and was "one of the fastest developing markets in the world."

"India's automobile market will grow each year from the current 1.2 million vehicles to over 2 million vehicles by 2014," Heizmann said. "Thanks to the local production of Volkswagen and Skoda models in Pune, we will benefit even more from enormous growth on the Indian automobile market in future."

Second plant more ambitious than first

The factory will have the capacity to manufacture some 110,000 vehicles a year, considerably more than the company's first plant in Aurangabad, which was opened in 2001. Some 25,000 cars are assembled each year in the city, which is also located in the state of Maharashtra.

By the end of 2010 the production plant is expected to employ around 2,500 workers.

Like its rivals, Europe's biggest carmaker has been hit by a sharp downturn in global automobile markets, but company officials have said VW has performed better than competitors because of its increasing presence in emerging markets.

The German auto giant sold nearly 19,000 vehicles in India by the end of December 2008 -- nearly 50 percent more than the same period in the previous year.