Nissan to join Indian venture

NISSAN Motor Co will join Renault SA and Mahindra & Mahindra Ltd's venture to build cars in India, two people familiar with the plan said on Friday.

The three auto makers will make an announcement today, the people said, according to Bloomberg News. The companies will set up a factory in Southern India's auto hub of Chennai, the people said, who declined to be identified before the announcement is made public. The factory will be 50 percent owned by Mahindra, while Nissan and Renault will each have a 25 percent stake, the people said.

Carlos Ghosn, who heads Nissan and Renault, cut Nissan's earnings forecast this month amid a sales slump in the United States and Japan - Nissan's two biggest markets. Nissan expects car demand in India, Asia's fourth-largest economy, to increase more than 10 percent a year as economic growth boosts salaries.

"India is the place to be in the auto industry now," said K.K. Mital, who helps manage 1.75 billion rupees (US$40 million) at Escorts Asset Management Co in New Delhi. "The demographics are in favor of strong, sustained growth here and that is why auto companies are investing billions."

In November, Nissan said it would make a decision by March 9.

"We're close to being ready to make an announcement," said Nissan spokesman Simon Sproule. "At this time we have nothing to add."

Volkswagen AG and General Motors Corp are entering India or expanding. Last year, auto makers announced plans to spend as much as US$5 billion in new factories in the south Asian country by 2012. Almost half of India's 1.1 billion people are younger than 25.

The auto makers plan to boost sales in India, where only seven in every 1,000 people own a car. Economic growth of as much as nine percent a year is also boosting the purchasing power of consumers.

India had the highest average salary increase in the Asia-Pacific region in the past year, according to results of a survey by human-resources consulting firm Hewitt Associates Inc.

Tokyo-based Nissan canceled a plan to build a factory in India with Suzuki Motor Corp in November because it needed more production capacity than Suzuki could meet.