With the investment in the new compact sedan, which has been specifically designed and developed for India, Volkswagen will add a new model to its product portfolio. The production of the compact sedan at Volkswagen's Pune plant is scheduled to commence in the first half of 2016.

"We are following a long-term investment plan in India and with our latest investment we have reaffirmed our confidence in this growing automotive market," Volkswagen India Pvt Ltd, President and Managing Director, Andreas Lauermann said in a statement.

The investment of Rs 720 crore is towards development, setting up new equipment and ramping up the production of the new compact sedan.

This is a part of the Rs 1,500 crore investment that was announced by Volkswagen India at the beginning of 2014. The Pune-based plant is getting ready for the production of the new model with changes and installation of new equipment.

The world-premiere of the new sedan is scheduled at the AutoExpo in February 2016.