The Rs 240-crore powertrain plant at its Chakan facility near here is spread over 3,500 sqmt and can produce 98,000 engines per annum in three shifts, all Bharat Stage III compliant.
The company will use the new power trains from the new facility for the models Polo, Vento and Rapid. The plant was inaugurated by the Maharashtra Chief Minister Devendra Fadnavis on Tuesday.
Fadnavis asked the company to make Maharashtra its global export hub and assured that his government will further reduce the existing 25 levels of approval needed to start a business.
The labour laws in the state were "anti-labour and anti-industry and only time killing", the Chief Minister said, adding that they would be revamped soon.
While the five Volkswagen group companies — VW, Audi, Skoda, Porche and Lamborghini -- together sell 25 models in the country, Audi being the largest in terms of volume and offerings and the market leader in the luxe car space, VW has been trailing with only three models — Vento and Jetta sedans and the Polo hatchback.
The company has not launched a model in India for a long time. While the VW group's Polish subsidiary Skoda had a good start initially, it has been been on downhill now.
Asked about a possible revival of Skoda India, VW Group India president and managing director Mahesh Kodumudi said he would not talk about Skoda on Tuesday.
"The 1.5-litre TDI engine has been specially developed for the needs of this market and is now being assembled locally. With this step, we take an important step towards achieving our long term goal of increasing local content," he said while launching the plant.
He did not specify the prices of the engines. He also ruled out price cuts on these three models, saying the latest batches have been priced keeping in mind  the local roll-out of the engines. So far, the company has been sourcing its 1.5-litre power trains from its Polish plant.
Kodumudi also said the company is looking at having a petrol engine facility in the country, but no decision has been taken so far.