Volkswagen is aiming for an 8-10% share of India's booming passenger car market by the middle of the next decade.

The company started assembly of the Polo supermini last week at its plant in western India which also builds the Skoda Fabia. A third model, a saloon, will be added to the production line in the second half of 2010.

VW took a 19.9% stake in Suzuki Motor last week and the two companies plan to develop a new small car for India that would cost between US$4,300-5,400.

"We know that we need a car below the level of the Polo," said VW board member Jochem Heizmann. "We are working towards this but no decision has been made yet."

Volkswagen is looking at various opportunities for synergies with Suzuki, Heizmann said, declining to give details.

He added the firm could consider bringing to India the cheapest car in its line, the Up, which is priced at about US$8,800.

It has set a target to localise production in India to about 80% within three years, up from the current level of almost 50%, to help price its cars more competitively.

The western Indian plant has an annual capacity of 110,000 units.

Sales of the new Polo start in March.

VW also said that it plans to have 200 Volkswagen, Skoda and Audi showrooms in India within three years.