The factory is likely to come up beside the current Renault-Nissan factory at Oragadam, near Chennai, according to reports.
A Nissan India Spokesperson said, "We are considering the possibility of producing an entry-level model at the Renault-Nissan Alliance plant in Chennai but we cannot go into any further detail."
Government officials refused to comment.
The company has been planning to revive the brand and expects it to contribute to half its sales.
The facility is expected to manufacture 200,000 cars every year, from 2014, added reports.
The facility is also expected to serve the exports market. The brand is also expected to be launched in South Africa next year, other than the three countries the company had announced earlier.
Datsun, a local product with the assurance of a global brand, is developed just 30 km away from the facility (Nissan's manufacturing unit at Oragadam)
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