Mumbai - Tata Motors Ltd will make its ultra low-cost Nano car in western Gujarat state, Chairman Ratan Tata said on Tuesday, days after India's top vehicle maker pulled out of West Bengal because of violent protests.
The plant to be built at Sanand, near Ahmedabad, will be located on about 1 100 acres (445 ha), and have an initial capacity of 250,000 units, which can be expanded to up to 500 000 cars per year, Tata said.
Tata Motors, which had planned to launch the Nano around October, will in the meantime explore the option of making it at existing units in western Pune city and northern Pantnagar.
"We lost a lot of time unfortunately, and I think we can try our best to do what we set out to do ... in a new home," Tata said at a news conference broadcast live on leading TV channels.
"It will be our endeavour to be as close to the timelines we set earlier (but) we may not have the volumes initially."
Analysts have said the company, which had invested about $350 million in the West Bengal site, could roll out hundreds or a few thousand Nano cars initially from its existing facilities.
Tata did not give financial details, only saying the agreement with Gujarat was "slightly better" than the one with West Bengal, and that the company would not incur "any significant losses" from the relocation of the plant in the year to March 2009.
"We will be retrieving most of our Singur cost," Tata said.
Ahead of the announcement, Tata Motors shares had ended up 0.9% at 316.60 rupees in a weak Mumbai market, after the company said it will hold a news conference in Gujarat.
"The expectation is there won't be any more disruptions or delays," said Vineet Hetamasaria, auto analyst at B&K Securities.
"They can have a plant up and running in 7-8 months, and do a limited rollout," he said, estimating the impact of the delay in ramping up production would be felt in the 2009/10 fiscal year, which starts next April.
Tata Motors on Friday pulled out of West Bengal, where violent protests by farmers unhappy with the compensation for their land had forced the firm to suspend work on its factory for more than a month.
The protests, backed by the state's main opposition party, had raised the debate over rising instances of conflict between industry and farmers unwilling to surrender land in a country where two-thirds of the population depends on agriculture for all or part of their livelihood.
Tata Motors, which also received offers of land from states including Karnataka and Uttarakhand, has said eventual demand for the Nano, which is expected to be priced at just above 100 000 rupees ($2 080), would be about 1 million units.
The "People's car", as it has been dubbed, was unveiled to a rousing reception in January and encouraged others, including Renault/Nissan, Ford Motor, General Motors, Toyota Motor and Volkswagen to announce plans for low-cost cars.
The Nano plant as well as the vendor facilities and other services in Gujarat, which has a reputation for being business-friendly, will together generate more than 10 000 direct and indirect jobs, Tata said.
The "mother plant" in Gujarat, where Tata Motors has no facilities currently, will also make electric and CNG variants, as well as export models, Tata said, reiterating an earlier plan to franchise smaller satellite plants to entrepreneurs.
"Hopefully, it will be a breeze here compared to Singur," said Ian Fletcher, auto analyst at Global Insight in London.
"It looks like a very, very positive step. There's a little bit more certainty about the project now, investors can finally see a light at the end of the tunnel." ($1=47.9 rupees)