Volkswagen will receive funding of around EUR2.9m (US$4.3m) during 2010 from the Polish government for development of diesel engine production at its plant in Polkowice, Agence France-Presse (AFP) reported.

VW will invest around EUR60m at the plant, which is expected to create around 50 additional jobs during the next five years. The automaker will have capacity of around 2,400 units a day of its 1.6-litre TDI common-rail engine. The plant currently employs around 1,100 workers at present.

VW was the second-biggest producer in the country during the month with output of 8,261 units; an increase of 10.05% year-on-year. VW's other facility at Poznan (Poland) employs around 6,000 people, turning out the group's Caddy, Caddy Max and Transporter T5 light commercials.

"Polish vehicle production has seen some revival during the second half of the year due to the various incentive schemes on passenger car models in western Europe. Poland enjoyed its geographic location to Europe and favourable exchange rates, which has attracted various automakers to invest in production in the country," IHI Global Insight analyst Tim Urquhart said in a note.