The Wall Street Journal (Paris) - French auto maker PSA Peugeot-Citroen said Thursday it plans to invest about €650 million to build a manufacturing facility at Sanand, the rapidly developing automotive cluster in the Indian state of Gujarat.

The move fits in with Peugeot-Citroen's goal of reducing its dependence on the mature markets of Europe. The company has said it is aiming to have half of its vehicle sales outside Europe by 2015, compared to 38% at present, by ramping up production capacity in China, Russia and Latin America, and now India.

The new complex will comprise a vehicle assembly plant with a paint shop. It will have an initial capacity of 170,000 vehicles annually with the possibility for later expansion. It will also manufacture engines and gearboxes using the latest power train technologies, said Peugeot-Citroen, Europe's second-largest automotive group by volume after Germany's Volkswagen AG.

The company said the site will generate 5,000 new jobs, creating further economic and employment opportunities through an extensive supplier park adjacent to the site, which will provide the company with necessary parts and services.

The first locally produced Peugeot car will roll off the assembly line in 2014, it said.

The plant will initially start producing a Peugeot-brand compact sedan, targeting at the most dynamic part of the Indian market. Later, the assembly plant will produce the Peugeot 508, a slightly larger up-market sedan that Peugeot launched earlier this year, a spokesman said. For now, there are no plans to launch models bearing the badge of the Citroen brand.

The state of Gujarat has been successful in trying to entice foreign automotive groups to set up industrial operations at Sanand, where India's Tata Motors Ltd. already builds the world's cheapest car, the Nano.

Ford Motor Co. announced in July that it is investing $1 billion to set up a vehicle assembly and engine manufacturing plant at Sanand, its second facility in India.

Peugeot currently has no presence in India, one of the world's most promising automobile markets. Before settling on Sanand, located 40 kilometers from the state capital Ahmedabad, the French company had also considered setting up its new Indian plant in Tamil Nadu or Andhra Pradesh.

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