Fiat India Automobiles (FIA), the equal joint venture between India's Tata Motors and Italy's Fiat, will invest Rs.2341 crore ($585 million) on its Ranjangaon facility in western Maharashtra to double output to 200,000 cars in four years as well as expand engines and transmissions output to 300,000 units from 200,000 and also boost parts and accessories during the same period.
While Tata and Fiat will invest Rs.650 crore ($162.5 million) each, the remaining funds will be raised through debt, FIA's CEO Rajeev Kapoor, said.
We have to capture the export market, Kapoor said, adding that Fiat aims to export 30,000 cars by 2010.
The total funds injected in the Ranjangaon facility will increase to Rs.4020 crore (over $1 billion), FIA said in a statement. It has already invested Rs.1679 crore ($419.75 million).
The facility is currently being used by Fiat to make the Palio hatchback. It also has plans to start producing the Linea sedan and the Grande Punto.
Tata Motors has plans use the facility to make some of its models from 2009, said Rajiv Dube, president (passenger cars division), Tata Motors.
Dube refused to elaborate which models Tata Motors would build at the Ranjangaon facility, but confirmed that it would not build the ultra-cheap car Nano there.
The company makes the Indica hatchback, Indigo sedan, and Sumo and Safari utility vehicles.
The expanded facility would be operational by 2012, said Ravi Kant, chairman, FIA, and managing director, Tata Motors.
After the facility becomes fully operational, it would provide employment to 4,000 directly and another 8,000 indirectly, Kapoor said.
India's third largest car maker and top commercial vehicles maker Tata Motors has entered into a manufacturing and distribution tie-up with Fiat for cars and engines in India and for commercial vehicles in South America. In Europe, Tata is expected to sell its products using Fiat's distribution network. Tata Group chairman Ratan Tata is also a Fiat board member.
India's booming economy has led to rising incomes, which, in turn, have given rise to an unprecedented demand for passenger cars in India. Annual passenger vehicle sales are forecast to double to 2 million units by 2010 in India, leading many foreign automakers to crowd the market and invest millions of dollars on setting up operations and expanding production capacity in the country.