Mercedes-Benz India Ltd will invest 700 million euros (Rs4,770 crore) to set up a truck manufacturing plant at its Chennai facility, despite an expected dip in sales this year.

Besides, the company would invest Rs450 crore this year to expand its retail network and increase its research and development workforce in Bangalore to 500 by end of 2010.

The infrastructure is expected to address future expansion plans of the company. "We will go ahead with our plans to set up a truck manufacturing facility in Chennai," Wilfried Aulbur, managing director and chief executive of Mercedes India told journalists in Hyderabad on Monday.

"The Chennai facility is in association with other partners and will be exclusively for commercial vehicles. India is an emerging automobile market and we hope that business will pick up gradually," said Aulbur. However, he declined to specify when the proposed unit, which is a joint venture with the Hero Group, would be operational.

He ruled out the possibility of exporting vehicles from the Indian facilities. "We have studied the possibility and it will not make a business case for us to make India an export base," he said.

The move by Mercedes Benz, now owned by Germany's Daimler, seems yet another pointer that the auto industry expects an upturn soon, as the company already operates a manufacturing base in Pune for passenger cars and commercial vehicles which, analysts say, is currently underutilised.