Visitors walk past a Skoda Fabia at the Volkswagen plant in Pune on Tuesday. (AP)

Mumbai, March 31: German car maker Volkswagen today opened a plant in Pune having an annual capacity of 110,000 vehicles.

Pune is the $151bn German firm’s second Indian facility after Aurangabad.

Plans are on to invest more than $750 million in the country, the bulk of it in Pune.

The Pune plant comes when companies are slashing costs and capacities, and passenger cars are witnessing challenging times.

Volkswagen’s strategy is to make “volume cars” in Pune and premium models at Aurangabad.

Aurangabad now makes Skodas — the Fabia, Octavia and Superb — and Audis, besides the Volkswagen Passat and Jetta.

However, this will change, and the Pune plant will manufacture the Skoda Fabia compact from May.

Initially, there will be an overlap as the Fabia will continue to roll out from Aurangabad for some time.

From next year, a hatchback version of the Polo — specially developed for India — will also be made in Pune.

According to Volkswagen, the investment in Pune is the largest by a German company.

Jochem Heizmann, member of the board of Volkswagen Aktiengesellschaft, said the German group was convinced of India’s enormous potential in cars.

“All experts say there will be strong growth from 1.2 million vehicles at the moment to over two million in the next five years,” he said.

Heizmann said the Pune plant would provide work to around 2,500 within a year. By the end of this year, the group would have around 120 dealers, an increase of 40 per cent.

Emphasis is also on localisation. From 50 per cent of Indian components now, the aim is of 80 per cent localisation in 2-3 years.

The Volkswagen group entered India in 2001 when it opened the Aurangabad plant in Maharashtra.