Tata Motors and Fiat will invest over Rs 4,000 crore (Rs 40 billion) in a joint venture to make cars and engines and may expand it to produce trucks as well.
The annual capacity will be more than 100,000 cars and 200,000 engines and transmissions and production will start from the beginning of 2008.
The venture will be located at the Fiat plant at Ranjangaon in Maharashtra. The investment will be shared equally.
Tata Motors and Fiat announced the formation of the joint venture at a press meet here today. The agreement for it was signed in July. It will also produce the Fiat Grande Punto and the Linea for Indian and overseas markets.
"The joint venture has given a clear signal that Fiat is coming back to India and Tata Motors is providing the platform for it," Ravi Kant, managing director, Tata Motors, told reporters.
No name has been fixed for the project yet but the cars produced by the factory will bear the Fiat badge instead of Tata-Fiat as was speculated earlier. The cars will be distributed by Tata Motors through the Tata-Fiat dealer network, which is also set to expand to 100 outlets from the current 42.
"This marks a new beginning for Fiat Auto in India. The last period was not as successful," said Alfredo Altavilla, Fiat Auto's senior vice-president for business development, on a solo push into the Indian market in the 1990s.
"We are now back and are here to stay and develop a strong footprint in one of the most promising automobile markets in the world," Altavilla said.
On the possibility of manufacturing trucks, he said: "We are open to entering the Indian market (for commercial vehicles). We are talking to the Tata group." Kant said comprehensive discussions were underway but it was premature to talk about details.
"This announcement further strengthens our strategic alliance with the Tata group. With the start of the project, we will give a critical boost to Fiat's competitive presence in India. The industrial co-operation with Tata will allow us to bring the flavour and technology of Fiat cars and powertrains at a cost in line with local demand," said Sergio Marchionne, chief executive officer of Fiat SPA.
Altavilla said about 150 employees from the now-defunct Kurla plant would be shifted to Ranjangaon, taking the total number to 4,000. This would happen in the next 3-4 years.
Fiat in November said it would manufacture Tata Motors' new 1-tonne pick-up truck at its plant in Argentina for Latin American and overseas markets from the second half of 2007-08.