Nissan joins Renault to build car plant in collaboration with India's Mahindra & Mahindra

Japan's Nissan Motor on Monday joined France's Renault SA's plan to build a car plant in southern India in collaboration with local automaker Mahindra & Mahindra amid strong demand for passenger cars from India's growing middle class.

The three companies will together invest about 40 billion rupees (US$900 million, EUR685 million) to build the plant near the southern Indian city of Chennai, said Pawan Goenka, president of the automotive division at Mahindra & Mahindra.

The plant, billed as one of India's largest with a capacity to manufacture 400,000 vehicles annually, is expected to roll out the first car in the second half of 2009, he said. It will manufacture both Renault and Nissan models.

It wasn't immediately clear how the three partners planned to share the total investment, which will be spread over seven years. But in terms of their equity stake in the joint venture, Mumbai-based Mahindra & Mahindra Ltd. will own 50 percent while Renault and Nissan will hold the rest, Goenka said at a news conference that was also attended by senior executives from Renault and Nissan.

The Indian partner will nominate the chief executive of the joint venture company, while its financial and technical controllers will be picked by Renault and Nissan, he said.

Renault cars will be sold through the domestic sales network of Mahindra and Mahindra, which currently makes tractors and jeeps. Nissan models, however, will be marketed through a separate distribution network, details of which have yet to worked out.

Nissan's Executive Vice President Carlos Tavares said the company had evaluated various options before joining Renault, which owns a 44 percent stake in the Japanese automaker, for its India venture.

"The advantages of working with our alliance partner (Renault) and its Indian partner was compelling," Tavares said.

In November, Nissan pulled out of talks with Suzuki Motor Corp. to jointly build a small car plant in India. That move came after Renault decided to ramp up its joint venture plan with Mahindra & Mahindra and invited Nissan to join.

Global automakers have been stepping up efforts to increase their presence in India, where the economy is growing close 9 percent annually and demand for cars is strong, thanks to rising middle class incomes and easier access to loans.

Earlier this month, Toyota Motor Corp. said it would build a second manufacturing facility in India to ramp up local production to 200,000 units a year by 2010 from 60,000 now, reports AP.

U.S.-based General Motors, Germany's Volkswagen and South Korea's Hyundai Motors Co. have also unveiled similar expansion plans in recent months.

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