German carmaker Volkswagen (VW) plans to invest $530m (£273m) to build its first factory in India, according to the German Embassy in New Delhi.
VW is targeting India's fast-growing car market
The plant is due to be built in the western state of Maharashtra, with an agreement to be signed between VW and the Indian government on Wednesday.
VW said the factory, which will employ about 2,500 people, would start production of a small car in 2009.
The news comes a week after VW unveiled up to 4,500 job losses in Belgium.
VW is keen to enter the Indian car market as vehicle sales in India are now growing 25% a year on the back of the country's booming economy.
The German firm's Czech subsidiary Skoda already has a factory in Maharashtra, which assembles its Octavia, Laura and Superb models.
VW is cutting jobs at its Brussels plant as production of its Golf model ends at the facility.
The company, which also owns the Audi brand, said it planned to build a new small Audi model at the Brussels factory.