The company aims to increase worldwide sales to 800,000 vehicles by 2020, from a current 440,000 a year.
"It makes sense to set up a car manufacturing facility in India as we target sales of 20,000 units by 2020 here," Volvo Auto India managing director Tomas Ernberg said in western Ahmedabad city, the Press Trust of India reported.
"A group within Volvo is conducting a feasibility report," he told reporters.
Volvo sold 820 units in India this year, up from 320 vehicles last year. The company expects sales of 1,200 vehicles in 2013.
Luxury car makers have dealerships in many large Indian cities, attracted by the growing numbers of wealthy Indians. Around 28,000 luxury car units were sold in India by players like Mercedes, Audi, BMW, Volvo, among others, this year.
Along with China, India has become a key market for global car manufacturers after growth in Europe and the United States stagnated in recent years.
Sweden's Volvo Bus Corp, a separate company, entered India a decade ago to
make heavy-duty trucks before moving into the luxury bus segment. The company
has a large bus manufacturing factory at Hoskote, near the southern city of