German luxury carmaker Mercedes Benz plans to infuse a fresh investment of Rs 250 crore into its Indian arm to double its production capacity to 20,000 vehicles by the end of this calendar.

“We are enhancing our production to cater to the increasing demand for luxury sedans and SUV in the domestic market,” Mercedes Benz India MD & CEO Eberhard Kern said. The cumulative investment for the Indian market would be raised to Rs 850 crore, he said.

“If needed and depending on the market expansion we would add more capacity to the Pune plant to meet our future sales projections,” Kern said at the launch of GL Class sports utility vehicle in New Delhi on Thursday.

Mercedes Benz plans to assemble the GL Class at its Pune plant September onwards to take the tally of locally made cars to five. Sedans like C-Class, E-Class, S-Class and the ML Class are already made at the plant.

The firm plans to add few more models later this year including the A Class hatchback, which would debut in the country later this month. Local assembling helps increase price competitiveness as such vehicles invite lower taxation than those imported.

Mercedes Benz, which once ruled the Indian luxury car market, has been struggling to keep pace with German rivals Audi and BMW in recent years. It sold 7,015 vehicles in India last fiscal year ended March while Audi sold 9,350 vehicles. BMW’s Indian subsidiary has not released any sales figures for the same period.

Kern said 2013 is the ‘Year of Offensive’ for Mercedes Benz India. “We plan to launch more hatchbacks and SUVs to suit the taste of the growing number of offroading aficionados in India,” he said.

Its latest launch — the GL Class — comes with an aggressive price of Rs 77.5 lakh (ex-showroom Delhi). It is powered by a 2,987 cc, V6 diesel engine and would be pitted against BMW’s X6 and Audi’s Q7 in the Indian market.

The company said that it has already sold out on the initial quota of 100 units of the launch edition of the GL Class.When the Pune plant starts rolling out the new SUV from September, India would be only the second international market after the the US to locally roll out the GL Class vehicle.