News: Volkswagen drives into Maharashtra

(BL 12/09/2006) Pune - Volkswagen has finalised an agreement with the Maharashtra Government to locate its Indian greenfield car manufacturing plant at Chakan in the outskirts of Pune.

Government sources told Business Line on condition of anonymity that the company has been given in-principle approval for 400 acres, adding that it is expected to ink an agreement and announce its plans in a few weeks.

The sources also said that a team of directors from the company has been in several rounds of talks with the State Government for a month now and finally thrashed out an agreement over the weekend.

Under the terms of the agreement, the State Government will hand over the land by November.

"The company wants to action its India plans as quickly as it can and what swung the deal in Maharashtra's favour is the fact that we were able to locate the right land for them and allot it within a month," the sources said. "The company is planning to start production by November 2007."

The company will invest an estimated Rs 2,500 crore in the facility and will initially manufacture small cars for the market, eventually broadening its portfolio to include models for other segments.

The Chakan industrial estate is already home to Bajaj Auto, which has located a motorcycle plant and recently acquired 250 acres for a greenfield plant to manufacture three- and four-wheelers.

The deal comes just over a month after General Motors announced that it would be setting up its Rs 1,300-crore second plant in India at the Talegaon industrial estate.

With Tata Motors and Fiat now inking a joint venture to make cars at the latter's facility at Ranjangaon near Pune, the region is developing into the auto industry's golden triangle.

The German company is believed to have been in talks with the Tamil Nadu and Punjab Governments for locating its facility.