VW has $530 mn for Pune unit

After several unsuccessful attempts to enter the Indian market, Europe's largest car manufacturer Volkswagen has finalised its plans for a manufacturing plant in Pune at an investment of Rs 2,450 crore ($530 million).

The company will sign an agreement with the Maharashtra government for the facility in New Delhi on November 29. It will be the 45th manufacturing facility for the Volkswagen group, while India will be the 19th country to produce its vehicles. On an average, the company produces more than 21,000 vehicles a day.

The car-maker plans to roll out the mid-sized Passat brand as its maiden offering in India, which will also be sourced to other Asian markets.

Before its Pune greenfield venture starts production, Volkswagen is expected to assemble Passat at its subsidiary Skoda Auto India's plant at Aurangabad from the first quarter of 2007.

The Passat shares the same platform as Skoda's Superb. The company, which has some of the best-known brands under its belt, including Bentley, Bugatti, Audi, Seat, and Lamborghini, is already represented in India by Skoda Auto. It is likely to introduce hatchback models in the future.

The company has been embroiled in controversy for long, which has delayed its investment plans for India by nearly three years. It had almost finalised a location with the Andhra Pradesh government but had to shelve the plan after one of its top officials allegedly siphoned off some of the initial funds.

Now, Volkswagen will be jointly represented by Hans Dieter Poetsch, Group CFO, and Detlef Wittig, CEO, Skoda Auto India.

Volkswagen had explored in the past a joint venture with the Eicher group. It was, in fact, the Indian government's original choice as the JV partner for establishing Maruti Udyog several years ago. But, low sales in the Indian market made the company walk out of the deal and make way for Suzuki.