UPDATE 1-Volvo earmarks 30 pct of India engines for export

Last Updated: Thu, Nov 15, 2012 09:50 hrs

* Engine plant capacity to grow to 100,000 per year by 2016

* Designed for 30 pct to be exported

* Many automakers using India as low-cost export hub (Adds quotes, details)

BANGALORE, Nov 15 (Reuters) - Volvo AB aims to eventually export 30 percent of the capacity at its Indian engine plant opening next year as the world's No.2 truck maker looks to leverage cost-efficiencies from its operations in Asia's third-largest economy.

Volvo will also increase the annual capacity of the plant by 25 percent from 80,000 engines by 2016, Chief Executive Officer Olof Persson told reporters in Bangalore on Thursday.

"The long-term capacity of the engine factory is 100,000 engines," Persson said. "Around 30 percent of that is going out of India into the European system."

Volvo, which operates in India alongside local partner Eicher Motors Ltd, joins a growing list of global automakers seeking to use the country as a manufacturing centre for parts and components to cut costs and as an export hub to other emerging markets around the world.

The automaker will work with Eicher to accelerate localisation of parts in the engines produced at the plant in Pithampur, central India, Persson said.

The Swedish truckmaker's plants in Europe were operating at less than full capacity, the company said last month, and it forecast no truck market growth in European or U.S. markets next year.

Volvo, which makes trucks under the Renault, Mack, UD Trucks and Eicher brands as well as its own name, said last month that operating profit for the quarter to September halved from a year previously, as new orders during the period fell 25 percent.

The Volvo Group will spend 20 billion rupees ($363.83 million) in India, Persson said without providing a timeline, in addition to the $330 million that Volvo and Eicher will spend on the 50-50 joint venture over the next two years.

Volvo is also one of a slew of global players, including major rivals Daimler AG and Scania AB, racing to grab a slice of India's buoyant truck and bus market dominated by Tata Motors Ltd and Ashok Leyland Ltd as traditional markets slow. ($1 = 54.9700 Indian rupees) (Reporting by Harichandan Arakali; Writing by Henry Foy; Editing by Ryan Woo)

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