Nissan-Renault begin building factory in India

Mumbai: Nissan Motor, Japan's third- largest automaker, and affiliate Renault began building a factory in India to challenge Suzuki Motor' dominance in the country.

The $1.1 billion factory will begin production in 2010 and will have a capacity to make 400,000 cars annually for local and export markets, the automakers said in a statement in Chennai in south India, where the plant is being built. Nissan will make the Micra model and other cars at the factory while Renault will produce cars based on the Logan and other platforms.

Renault, with 2.2 per cent of the local market, and Nissan have lagged behind rivals in expanding into India, where Suzuki has 50 per cent of the market. Automakers including General Motors, Ford Motor and Volkswagen have already announced a combined $6 billion in investments in the country, where car sales may double by 2013.

"Those who have a foot in the door now can capitalise on it later," said Ashutosh Goel, an analyst at Mumbai-based brokerage Edelweiss Capital. "There's a large domestic market for compact cars, and the cost of manufacturing is also lower."

India's automobile market will double to four million vehicles, according to Global Insight, an industry consultant.