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
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 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