Swedish transport major Volvo will export buses made in India to Europe initially and global markets subsequently, a top company official said on Tuesday.

"We will be the first bus company to export to the European market from India, taking advantage of lower manpower costs and neutral duty," Volvo Buses Corporation president Hakan Agnevall told reporters

Volvo entered India 15 years ago, ostensibly to foray into high-end truck segment, but got into the luxury buses with first move advantage as domestic rivals Tata Motors and Ashok Leyland have been contended rolling out ordinary buses for cities and semi-luxury coaches for inter-city and inter-state routes.

"Besides lower manpower cost and minimal overheads, we will avail customs duty exemptions on import of engines, components and accessories used in making buses for exports at our factory near here," said Volvo Buses vice president Akash Passey.

Volvo's Indian subsidiary has invested an additional Rs.400 crore in doubling its installed capacity at its Hoskete plant, 40 km from Bengaluru, to 1,500 units per annum. It employs about 1,000 people.

"As the country's passenger transport market has been down over the last couple of years due to various factors, including recession, we could not fully utilise the production capacity as the demand or order was for 600-800 buses per annum," said Passey.

Volvo India has been exporting luxury air-conditioned buses to South Asian countries like Bangaldesh, Maldives and Sri Lanka since 2003 and to South Africa since 2011, for multiple services, including inter-city, inter-state, long distance and within cities.

Besides here, the company has a manufacturing base in Shanghai, Bangkok and Taiwan.

"It's a milestone for us to export buses from India to developed markets in Europe though we are a European company and has a major presence there with a couple of manufacturing plants in the continent," said Agnevall.

The type of luxury buses to be exported will be Euro-6 complaint for mass rapid transportation in European cities, where demand is about 5,000 units per annum.

"We will use India as export hub overtime for developed markets like Europe, leveraging our manufacturing presence, with a strong vendor base," Agnevall added.

By focusing on exports, the Indian subsidiary will also be able to face the cyclical domestic market demands, which have been linear over the years due to economic slowdown and lower orders from state-run corporations and private operators.