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Volkswagen signs deal to build the 'Detroit of India'

INDIA: Volkswagen, Europe's leading automaker, signed a deal Wednesday to build a 410-million-euro (539 million US) 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, told reporters in the Indian capital.

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 car makers.

"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".

"This model will have a very attractive price while offering all the essential features of a genuine Volkswagen, with all the benefits of our brand," he said, after signing the agreement with Maharashtra Chief Minister Vilasrao Deshmukh.

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.

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