Mercedes-Benz India (MBI), the fully-owned Indian subsidiary of Daimler AG, yesterday inaugurated its new 100-acre manufacturing facility at Chakan near Pune.

Set up at a cost of Rs300 crore, the project was completed in just 13 months, which the company claims is a record of sorts. The plant was inaugurated by state chief minister Ashok Chavan in the presence of a large number of state ministers and political dignitaries.

The plant will have the capacity to initially make up to 5,000 passenger cars and 1,200 commercial vehicles annually, employing around 500 people. It is spread over 100 acres, with separate assembly facilities for passenger cars and CVs. The facility has been planned with an eye to future expansion needs.

Wilfried Aulbur, chief executive officer of Daimler's Indian arm, said the plant will initially produce Mercedes-Benz cars on a single shift. "This is a totally demand-driven market and we will gradually increase it to three shifts depending on the demand," he told reporters at the inauguration.

The plant is designed to manufacture the company's current local-production portfolio - the Mercedes-Benz C, E and S class. It is also flexible to accommodate additional production of other models from the company's range if required.

The new plant, set up with an investment of 50 million euros ($63.7 million) has a capacity to make 5,000 cars and 1,200 trucks and buses a year on single shift.

Aulbur said there were liquidity issues in the market and the company was working with financers for its buses and trucks ''as there are stringent norms for lending to small and medium enterprises. We raised prices of our products across the board by 2.5 per cent last week.''

The company's trucks will initially focus on the coal mining sector, and MBI will look at other areas in future, he said, adding that the company had been sourcing products locally for the last ten years and this had been growing at 10 per cent annually. However, he ruled out setting up engine and transmission facilities in India in the foreseeable future.

Mercedes-Benz's association with India dates back to 1954, when it collaborated with Tata Motors for the production of trucks; subsequently it also cooperated with Force Motors in 1969.

Again in a joint venture with Tata Motors, Mercedes-Benz became the first luxury carmaker to set up local production in India in 1995. A year later, the Mercedes-Benz Research and Development unit was established in Bangalore.

After the joint venture with Tata Motors ended in 1997, the German company continued to make its cars at a facility leased from Tata Motors till the end of last year.

Growth amid downturn
Mercedez-Benz India chairman Joachim Schmidt said, ''I am not sure how the developments in the automobile industry in the world will pan out. Almost all auto markets are in a downturn and I think overall, the passenger car market will see a negative growth of 10 per cent in 2009 over 2008.''

The company's $1.1-billion joint venture with the Hero Group to make trucks, Hero-Benz, where Daimler-Benz has a 60 per cent stake is on track to set up a facility near Chennai, Schmidt said.

Mercedes-Benz had 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 per cent, he said. He added that 2009 would be a difficult year.

"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, adding that demand for luxury vehicles in India was buoyant despite the downturn in world automobile market. He said that this year also he expected it to be better than demand worldwide.