Daimler opened a 50 million euro ($63.7 million) manufacturing plant in India today. The factory will build Mercedes-Benz C-, E- and S-class cars.
The factory in Pune, western India, has a capacity to build 5,000 cars and 1,200 trucks and buses a year on a single shift.
Daimler plans to add more shifts at the factory in the future.
"This is a totally demand-driven market and we will gradually increase production to three shifts depending on the demand," said Wilfried Aulbur, CEO of Daimler's India unit.
Aulbur said the new facility could also make other models if needed.
"We have a flexible manufacturing process and it will allow all of our other global products on the same assembly line," he said.
The factory will also make vehicles for the coal mining sector and buses for inter-city travel.
Mercedes doubled car sales in India to 3,600 units in 2008, while the growth in Thailand, Singapore, Malaysia and Vietnam had been less than 10 percent, Aulbur said.
The new factory replaces a plant that Daimler opened on the site in 1995. The factory built 3,600 cars last year.
Joachim Schmidt, chairman of the Mercedes India board, said 2009 will be a difficult year but demand for luxury vehicles in India is buoyant despite the global economic downturn.
"It will be hard for us to give numbers, whether we will remain flat or grow but we see great potential in the mid-term," he said.