German commercial vehicles major Mercedes-Benz India will begin trial run of low-floor luxury city buses to take on Volvo in the growing city-bus segment, its top official said.

“The trial run of the low floor fully built luxury city buses powered by cutting edge technology will begin within three days with Pune and Pimpri-Chinchwad municipal corporation’s Mahanagar Parivahan Mahamandal,” Wilfried Aulbur, MD and CEO, Mercedes-Benz India, said.

Low-floor city buses are sold at a price of around Rs 65 lakh each and major players such as Volvo, Ashok Leyland, Tata Motors are competing in this segment.

He said two-three months trial run of the diesel bus would be conducted at each of the five-six cities in Rajasthan, Karnataka, Gujarat, Haryana and Maharashtra to make the buses safe and suitable for Indian roads.

“There is a huge demand from both state transport undertakings as well as private travel agencies,” Aulbur said.

The commercial production of the 57-seat luxury city buses will begin at its Chakan plant in the third quarter of 2011, he added. Industry sources estimated that it would carry a price tag of Rs 80-85 lakh. The 43-seat 2-axle and 57-seat 3-axle inter-city luxury coaches cost Rs 75 lakh and Rs 83 lakh each.

“We plan to set up a dedicated assembly line that will produce the city buses at its state-of-the-art 100-acre Chakan plant,” Aulbur said. The Pune plant has a total investment commitment of Rs 300 crore of which it has already spent Rs 250 crore for independent assembly facilities for passenger cars and commercial vehicles.

It has tied up with its global partner MCV Egypt SA that will set up MCV India which will be a captive vendor at its Chakan premises for complete body building of the city buses.

With 500 employees, the Chakan plant assembles around 10 buses every month. The company sold a total of 68 buses since its launch in 2008, including 43 buses in the last five months in 2010. “The market for high-end luxury city buses is lucrative at 500-600 units per annum which is expected to grow by 20 per cent year-on-year,” Aulbur said. This segment will be a major focus in India, he added