Volkswagen Signs Deal To Build The 'Detroit Of India'

First plant in Pune will produce 110,000 cars.

Volkswagen, Europe's leading automaker, signed a deal Nov. 29 to build a 410-million-euro (US$539 million) plant in western India at a site state officials said will become "the Detroit" of India. "India is one of the most interesting future markets for the global automotive industry. We are determined to develop the market potential without delay," Volkswagen's chief financial officer, Hans Dieter Poetsch, said.

The new factory will produce up to 110,000 cars in the city of Pune, in Maharashtra state, by 2009, aimed at the local market for now, although executives for the company said exports were possible at some point. The plant is a coup for Maharastra, home to the country's financial capital Mumbai. The state has battled with other industrial enclaves in India, such as suburban New Delhi, western Gujarat and southern Tamil Nadu states, to entice carmakers.

"It (Pune) will become the Detroit of India. All the major automakers are putting their plants here," said V.K. Jairath, secretary for the industries ministry in Maharashtra state.

Before the new plant comes online, Volkswagen will start manufacturing its mid-sized Passat cars in India from mid-2007 at an existing factory of group company Skoda in Maharashtra. Poetsch said Volkswagen would also be developing a vehicle "in the foreseeable future specifically tailored to the needs of the Indian market."

The German manufacturer, which has been exploring a direct entry into the Indian market for nearly two decades, has said the new factory would employ about 2,500 people.

Earlier this month, French carmaker Renault announced it would build its second plant in India, where it will construct the no-frills Logan car to take advantage of "important opportunities for growth and profitability."

Other big names such as General Motors, BMW, Suzuki and Honda and Hyundai have also been moving to invest in India with its low-cost production base. GM, which has one plant in India, in Gujarat, is gearing up to spend $300 million on a second plant to assemble the hatchback Chevrolet Spark. It is aiming to garner 10% of the market by 2010, up from nearly 3%. Ford has a plant in southern Tamil Nadu state, as does South Korea's Hyundai. Suzuki, which owns 54.2% of leading Indian carmaker Maruti Udyog Ltd, will spend about $2 billion by 2010 to expand capacity and set up a new diesel engine factory outside of the capital New Delhi.

India also has hundreds of small manufacturers who make everything from radiator caps to steering gear for auto companies worldwide, as well as domestically.

Copyright Agence France-Presse, 2006

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