Daimler Hero Commercial Vehicles, the joint venture between Germany's Daimler and the Munjals-promoted Hero Group, said on Monday it would set up its manufacturing unit in Chennai as part of its Euro 700 million investment plan over the next five years.
"The Indo-German joint venture will soon begin the construction of a new factory in Chennai, where it will produce commercial vehicles under a new brand name for the Indian volume market and exports," DHCV said in a statement.
The plant, which would be functional in 2010, would produce up to 70,000 trucks in its initial phase of operation.
The company said it plans to export from the plant to markets whose product requirements are similar to those of the Indian market.
The investment plan is valued at about Rs 4,500 crore (Rs 45 billion).
The company said it has signed a memorandum of understanding with the Tamil Nadu government for setting up the plant.
DHCV aims to achieve a localisation rate of up to 80 per cent in order to optimally utilise cost advantages, it said.
The proximity of the Chennai plant to the local supplier industry will greatly help utilise these cost advantages and also help the local industry and community.
The plant would be set up on 400 acres of land, located at Oragadam in the direct neighbourhood to several supplier parks, where Daimler Hero Commercial Vehicles could also secure sites for future suppliers, it added.
Daimler AG and Hero Group signed the contract in April this year establishing the joint venture, in which the German company has 60 per cent stake and the rest is with Hero.