German technology company Continental is setting up a factory in Pune with an initial investment of Rs 180 crore to manufacture premium surface materials for the automotive industry in 2020.

The €44 billion company will supply premium interior decorative materials such as the acella eco artificial leather to luxury carmakers like Mercedes-Benz, BMW, Audi, Volvo and mass car makers such as Maruti Suzuki, Tata Motors and Mahindra and Mahindra, among others, in the country.

The acella eco artificial leather is already proving popular in India as a replacement for real leather.

“India is an important market for us and we are here for a long haul. The factory in India is the 16th plant globally, which will bring in the latest and best technology and engineering processes,” Dirk Leiss, global head of the surface materials business unit at Continental, told Financial Chronicle.

He said the commercial production will start in January-March 2019 with 110 employees initially, and scale up to 250 employees within a couple of years.

Initially, the new facility will have an annual capacity to produce 5 million square metre of material and scale it up as per the market demand, Leiss said.

“India is the fifth largest automotive market in the world with huge growth opportunities,” Leiss pointed out, adding that every new vehicle needs interior materials for seats, door trims and instrument panels.

He said the number of vehicles in India could more than double from the present 4.8 million to around 10 million by 2025 and Continental was eyeing a huge market for its state-of-the-art products.

“Premium interiors are an important selection criterion for buyers of vehicles,” Leiss said. The solvent-free and thus low-odour decorative material is hard-wearing and is available in a two-colour design, he said.

Leiss said the new plant would cater to the Indian market and localise production to reduce supply time to vehicle manufacturers in India. In addition to acella eco, the plan is also to manufacture the environmentally compatible yorn and yorn light expanded foils, he said.

The new facility, which will offer room for further expansion, will include production, warehousing, R&D labs, sales, logistics and product development facilities and local purchasing. The company said only environment-friendly ink systems would be used on the shop floor.