BMW’s India unit said it had expanded production capacity at its KD assembly factory in the southern city of Chennai to 11,000 vehicles a year from 10,000 to meet rising demand.

“India is witnessing dynamic growth,” BMW India president Andreas Schaaf told Dow Jones. “In BMW, production always follows demand and we added a second shift at our factory earlier this year to meet the demand.”

Schaaf, speaking as the company launched its X3 SUV to rival Audi’s Q5, said the company will invest INR700m until December 2012 to ramp up operations. BMW India has so far invested INR1.1bn on its operations, including the Chennai factory.