UK-based Caparo Group's India unit said on Tuesday that it has agreed with South Korea's Hyundai Motor Co to produce and sell luxury buses in India, targeting the fast-growing commercial vehicle market.
Caparo India plans to set up a greenfield facility in southern India, from where the Hyundai Aerobus will roll out for the Indian market.
Sunil Pahilajani, managing director and CEO, Caparo India, said that the plant, which will operate as a wholly-owned subsidiary of Caparo India, under its division Caparo Vehicle Products India, will commence production in the final quarter of 2008-09.
Caparo signed the technical support agreement with Hyundai Motor on Monday evening.
"By supporting the Caparo India plant, we are looking at growing our presence in India into the luxury transportation segment," Choi Han Young, president, and Yong Won Jang, director, Hyundai Commercial Vehicles, said.
The facility to be set on 20 acres will employ 200 people to start off with.
The company will decide the site for the plant after evaluating its existing land banks in Sriperumbudur and Oragadam in Tamil Nadu and Nellore in Andhra Pradesh, Deb Mukherji, CEO - Business Growth, Caparo India, said.
The Aerobus, which will have three variants with powertrains in the 320-380 HP range, will be assembled as completely knocked down kits.
The company plans to produce 1,500 units annually, Pahilajani said. Localisation of the bus will be a gradual process, he explained. Caparo would start by localising the development of the chassis and then move on to other components.
The executives did not divulge specific investments, but said that the new facility would be wholly financed by Caparo. For a start, Caparo India will focus on domestic sales, but it has not ruled out the possibility of exports at a later stage.
The companies have joint branding plans for Aerobus in the domestic market, while marketing will be the sole responsibility of Caparo.
Declining to reveal royalty payments that Caparo would make to Hyundai on each vehicle sold, Mukherji said that this would be in accordance with RBI guidelines.
The buses will be specially engineered to give higher durability and aim for stability, quietness during high-speed cruising and fuel economy. They will be fitted with powerful and efficient Euro IIIV engines, air-wide suspension and ABS systems, Hyundai executives said.
Hyundai, which said in February it was talking to Indian firms for a possible venture for commercial vehicles, expected the market for luxury buses, to be mainly used for tourism, to reach 10,000 units in 2010.
