BMW, the German luxury car maker, has decided to set up a plant in Chenglepet, Tamil Nadu, through a wholly-owned subsidiary at an investment of Rs 100 crore (Rs 1 billion).

The Chenglepet plant will assemble automobiles using completely knocked down car parts kits imported as well as sourced in India, sources close to the development said.

It will also import completely-built units from the German parent and its group companies. The Indian subsidiary will also market and distribute the automobiles in India and overseas, in addition to providing after-sales service.

Many deem India as the final frontier in the automobile battle, given that the market, which recorded a million in car sales last year, has the largest growth potential after China but remains relatively untapped, especially at the premium end.

In recent times, BMW has made a number of visits to the sub-continent to examine the feasibility of setting up operations. In one, a four-member team led by senior manager Wolfram Rehm was here to assess the possibility of setting up shop in Kerala. Other locations considered included Andhra Pradesh, Tamil Nadu and Karnataka.

Former Haryana Chief Minister Om Prakash Chautala, too,had claimed some months back that BMW would set up a manufacturing facility in the state.

BMW, the sources said, had told the government that it wanted to convert BMW India, incorporated in 1997 with a paid-up capital of Rs 100,000, into a wholly-owned subsidiary by acquiring all its 10,000 shares from the company's existing shareholders, Ravinder Nath and Satish Kumar Narula, at a face value of Rs 10 a share.

Besides, BMW will infuse fresh capital into the company at a face value amounting to Rs 73 crore (Rs 730 million).