Volkswagen opens 766-million-dollar factory in India

Mar 31, 2009, 11:00 GMT

   Pune, India - German carmaker Volkswagen AG opened a 580-million-euro (766-million-dollar) factory Tuesday in western India as it seeks to expand its market share in the growing economy as demand tumbles in its long-established markets.

   Despite the global recession, Europe's largest carmaker said at the opening of the plant in Chakan near Pune that it would hold to its sales goals in India, aiming to increase the market share of its brands Volkswagen, Audi and Skoda from around 2 per cent to 8 to 10 per cent within five years.

   However, India, which is the fastest growing car market in the world after China, is also seeing the effects of the global economic crisis, said Jochem Heizmann, Volkswagen board member and production chief. Its car market has been slowing since the second half of last year, he said.

   'Despite the present crisis, we are firmly convinced that the Indian auto market has enormous potential, Heizmann said. 'All experts predict strong growth from today's 1.2 million cars [sold per year] to more than 2 million in the next five years.'

   The plant is to begin production of Skoda Fabia hatchbacks in May before expanding production with a hatchback version of the Volkswagen Polo especially developed for India next year.

   The construction of the factory, which has a capacity to produce 110,000 cars per year, took one and a half years and was finished nine months earlier than planned.

   By the end of 2010, Volkswagen plans to employ 2,500 workers at the plant, its 61st in the world and the largest single German investment on the Indian subcontinent so far. The site would also create numerous other jobs at suppliers in the region.

   Volkswagen entered the Indian market after years of delay. It had first planned to build in the southern state of Andhra Pradesh, whose government allegedly paid a 2-million-euro kickback to Helmuth Schuster, the personnel chief of Volkswagen's Skoda operations in the Czech Republic.

   Planning for the factory was suspended in the wake of the corruption scandal, and at the end of 2006, Volkswagen signed an agreement with Maharashtra state to build its plant in Chakan.