NEW DELHI (AP) – Volkswagen AG, Europe's largest car manufacturer, plans to invest $530 million to build its first plant in India, the German Embassy announced Tuesday.

The factory will be built near the city of Pune in the western state of Maharashtra, the embassy said in a statement. An agreement between Volkswagen and the government of Maharashtra state will be signed Wednesday, it said.

The plant will employ approximately 2,500 workers and will start producing a compact vehicle in the second half of 2009.

Volkswagen-owned Czech carmaker, Skoda Auto AS, already has a plant in Maharashtra that assembles the Octavia, Laura and Superb sedans.