French automotive group PSA partnering with India's CK Birla group will invest around 100 million euros (Rs 700 crore) setting up a 100,000 units per annum car plant near Chennai.
Both Peugeot and Citroen of the PSA group are looking to enter the automobile market in India.
This is a major automotive sectoral investment that Tamil Nadu has got after Chief Minister O. Panneerselvam took charge.
The manufacturing capacity for powertrains would cater to the domestic market needs and global vehicle makers.
The performance of the industrial set-up would be supported by a significant level of localisation in order to reach the necessary cost competitiveness.
The PSA group is the second French automotive group to set up base here after Renault.
The partnership between PSA and CK Birla group involves two joint ventures.
"As part of the first agreement, the PSA Group will hold a majority stake in the joint-venture company being set-up with HMFCL for the assembly and distribution of PSA passenger cars in India," a PSA statement said on Wednesday.
"As per the second agreement, a 50:50 joint-venture is being set-up between the PSA Group and AVTEC Ltd for manufacture and supply of powertrains.
"The manufacturing sites for both vehicle assembly and powertrains will be based in the state of Tamil Nadu," the statement added.
According to PSA, the Indian project is in line with its strategic plan 'Push to Pass' and the growth plan of CK Birla group.
This long term partnership will allow both companies to participate in the growth of the Indian automotive market, which is expected to reach 8 to 10 million cars by 2025(1) from current three million in 2016.