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Auto plant to be built in India

Japanese automaker Nissan joined on Monday a venture by French partner Renault to build a US$902 million plant in India, seeking to compete with rivals Toyota and Honda for a slice of a booming car market.

Nissan and Renault will together hold 50 percent of the venture, with local partner Mahindra and Mahindra taking the rest, the three companies said in a statement.

The southern city of Chennai, known as India's Detroit, was chosen as the location for the factory, which will have the capacity to turn out 400,000 cars a year seven years after the start of production in 2009.

Nissan and Renault are late coming to the Indian car market, which is forecast to expand 10 percent a year to reach 2 million units in 2010 as an economy expanding 9 percent a year boosts the buying power of consumers and stokes demand for personal transport.

The Indian car market expanded by 68 percent between 1998 and 2003 to reach 1.04 million vehicles in 2004, according to Renault.

"India is a key market for Renault's international growth ambitions," Patrick Pelata, Renault's executive vice president, said in the joint statement.

Honda is already selling City and Civic models in the country and Toyota's local range includes the Innova and Corolla. Another Japanese rival Suzuki's venture is India's biggest carmaker.

Nissan joined the alliance to "gain a rapid entry advantage for local manufacturing in India," Carlos Tavares, the firm's executive vice president said in the statement.

"Nissan was able to evaluate several different options for our first manufacturing base in India but the advantages of working with our Alliance partner and their local Indian partner was compelling," he said.

Nissan already has manufacturing sites in Japan, US, UK, Spain, Mexico, China, South Africa, Thailand and Egypt.

The 400-hectare Chennai factory will provide auto production capacity for each partner, enable the rollout of both cars and sports utility vehicles and include a powertrain facility for Renault and Nissan.

A range of automobiles tailored to the Indian market will be rolled out under the alliance, which will enable Mahindra to move into passenger cars from utility vehicles.

"This is a red letter day in the globalization of the Indian automotive space," Mahindra group chairman Keshub Mahindra said. "The expansion of our strategic partnership with Renault to include Nissan is designed to bring world-class platforms to the evolved car buyer."

Chennai's choice as the location for the new plant strengthens its position as the hub of car and car parts manufacturing in India. The city already hosts the factories of Ford and Hyundai, and has been chosen by Germany's BMW to locate a plant.

Chennai was selected "for reasons including its well developed automotive and components industry, high education levels in its workforce, and its overall infrastructure including its port facilities," the joint statement said.

International automakers drove into India after the country opened up its vast market to overseas investment as part of sweeping economic reforms launched in 1991 that overturned four decades of semi-socialist policies that shunned the manufacture of so-called luxury products.

For decades India's roads were dominated by two ancient models, the Premier Padmini and the Ambassador, produced with technology dating back to the 1950s.
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