Nissan Motor Co will build a 200,000 unit-a-year car factory in India with an initial investment of $420 to $500 million, the Nikkei newspaper said on Monday. To support the Japanese automaker's production, about 10 parts suppliers from Japan will also start local operations, bringing the group's total investment to around 100 billion yen, said the Japanese business daily.

Among its group suppliers, Calsonic Kansei Corp is due to invest as much as 5 billion yen for a factory to produce airconditioning units and other parts. The plant will begin operations in 2009.

Production will mostly centre on a new compact car with an engine displacement of around 1000cc. About one-third will be sold in India, and the rest exported to Europe and other regions, the paper said. Nissan is considering whether to participate in a joint project between France's Renault SA and Mahindra & Mahindra which are due to build a plant to assemble 500,000 cars a year from mid-2009. Renault holds 44 percent of Nissan while the latter has a 15 percent stake in the French automaker’s equity.

Nissan has said it would make a decision by the beginning of March. The Nikkei said Nissan would still take a stake in the Renault-Mahindra venture, but had decided that India's fast-growing car market warranted a plant of its own especially in light of export possibilities due to cheap production costs.

Nissan's plant, whose location will be finalised this month, would gradually add more models, eventually expanding its annual capacity to 400,000 units, the paper said. Two or three port cities in the west and south have been shortlisted.