New Delhi, Jan. 1: Nissan Motor Company ó Japanís second largest car manufacturer ó is planning to invest up to $500 million to set up an automobile plant in India.
To facilitate Nissan, about 10 parts suppliers from Japan will also start local operations here, bringing the groupís total investment in India to around $800-850 million, sources said.
The plant, which is expected to be operational by 2009, will have an initial annual production capacity of 2 lakh units, which can be expanded to 4 lakh units later. The construction of this facility is expected to begin this year.
Sources said the plant would manufacture a compact car with an engine capacity of 1000cc. Approximately a third of the vehicles will be sold in India, while the rest will be exported to Europe and other regions. Later, the company may produce other models at the plant too.
The company is considering two to three locations in the western and southern parts of India for the plant. While a final decision is likely to be taken by March, the company has plans to begin negotiations with the respective state governments soon.
Under its mid-term plan, Nissan is looking for cheap production and parts procurement sites which it calls Ďleading competitive countriesí or LCC and has earmarked India as a candidate example, along with China.
Among its group suppliers, Calsonic Kansei is due to invest as much as 5 billion yen for a factory to produce air-conditioning units and other parts.
Nissan, which exports some 200 vehicles a year to India from Japan, will work on developing a dealership network and eventually open about 100 branches in major urban areas by 2010.
Nissan is also contemplating whether to participate in a joint project between France's Renault SA and utility and tractor vehicle major Mahindra & Mahindra, which are due to build a plant to assemble five lakh units a year from mid-2009. Renault holds 44 per cent of Nissan.
It is estimated that India's passenger vehicle market could double to 2 million units by 2010. Japanese automobile companies like Suzuki Motor Corporation and Honda Motor Company have already established their presence in India. But for Nissan, which has been trying to make a foray into this growing market, this will be a new beginning.
Maruti Udyog produced in excess of six lakh units in 2006. Hyundai Motors, one of Marutiís biggest rivals in the Indian market, recently announced plans to set up a second plant in Chennai, which will raise total production capacity to six lakh units per annum by 2007.
German car manufacturer Volkswagen has also announced plans to produce 1,10,000 units at its new manufacturing facility in Maharashtra at an investment of Rs 2,400 crore.
Nissan has an agreement with Suzuki to supply Nissan with a new small car on an original equipment manufacturing (OEM) basis, mostly for export to Europe starting in 2008. However, in November, it called off discussions to form a separate joint manufacturing project in India with Suzuki. Toyota Motor is also looking to develop a low-cost passenger vehicle to boost its limited presence in India and challenge the dominance of Maruti Udyog.