Though company officials have been shy of confirming the move, Kerala has emerged as an unlikely contender along with frontrunner Gujarat for an engine manufacturing plant that Volkswagen plans to set up soon, a local paper said.

"Three Volkswagen officials including an executive director and general manager met us and submitted an expression of interest to set up a plant in Kerala," V Somasundaram, additional chief secretary, Kerala, told the Hindustan Times. "They said they would need three to five acres of land."

Volkswagen group spokesperson Alexander Skibbe was not available to comment despite repeated attempts.

Kerala, struggling to shed an anti-industry image, highlighted the proposed Volkswagen project as part of an investment commitment the state has won during a just-concluded business summit. This triggered a controversy with local media reporting contradictory statements from Volkswagen.

"They discussed this plan with us. I don't know how a contradicting statement emerged," added Somasundaram.

Much as Kerala yearns for investment, its chances of attracting automotive manufacturers appear grim due to the lack of a vendor base and the high cost of labour.

MRF and Apollo tyre factories are the only noteworthy investments in Kerala in auto and auto ancillary segments as the state tops in the production of rubber, their key ingredient.

It is possible that Volkwagen just scouted Kerala as a possible destination, the Hindustan Times speculated. Gujarat and Tamil Nadu have been the big gainers as and when auto majors have looked beyond Maharashtra following changes in its tax policies.