Volkswagen has established a new diesel engine assembly line and full-fledged engine testing facility at its plant in Chakan, Pune.

Volkswagen India has invested € 30 million (US$ 39.91 million) in this first step of engine assembly and production of parts and components at suppliers in India.

The company said the assembly of the new 1.5-litre, TDI diesel engine which was designed specifically for the Indian market would commence at the end of 2014.

It has been working at increasing the level of localisation of models produced at the Pune plant.

Mahesh Kodumudi, group chief representative, Volkswagen Group India and president and managing director, Volkswagen India said, "Our investment in this state-of-the-art engine assembly line which incorporates a sophisticated and full-fledged engine testing facility at our Pune Plant in Chakan is the next important step in strengthening our commitment towards India. With this, we take a significant leap towards enhancing our localisation in India."

The new line can assemble over 98,000 engines in a three-shift-system at full capacity.

The locally-assembled engine will be used in the recently-launched Polo and Polo GT TDI.

With an initial investment of € 580 million and additional investment of € 100 million, the Pune plant is the single-largest investment of a German company in India so far.

The facility houses the entire automotive production process from the press shop, body shop, paint shop and assembly along with an in-house R&D facility.