This marks the company's first overseas manufacturing foray. The bus unit will be eventually upgraded to a vehicle assembly unit (for trucks and buses) in the second phase.
A company statement said it had signed a memorandum of understanding with the Ras Al Khaimah Investment Authority (Rakia) on Thursday.
The agreement was signed by R Seshasayee, managing director, Ashok Leyland, and Dr Khater Massaad, chief executive officer of Rakia, a public body established
The assembly, which will employ about 450 people, is expected to commence operation in a year.
"The proposed unit will allow local value addition close to a growing market for Ashok Leyland. Customers stand to benefit through better finish and timely delivery, as we can avoid shipping of finished products," said Seshasayee.
As a strategic window to Gulf Cooperation Council and neighbouring countries, the company plans to scale up operations of the unit in phases.
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