Mumbai-based Mahindra & Mahindra is looking to set up a greenfield facility in Tamil Nadu for tractors, three and four wheelers at Rs 1,800 crore (Rs 18 billion).
The company which is facing a capacity saturation for its tractors -- a segment where its the market leader with 41 per cent share -- is looking to have an additional capacity in place for future demand.
M&M is in the final stages of negotiations for about 450 acres of land with the state government and is expected to sign a memorandum of understanding with it soon, said a senior company official.
The facility, which will be next to the Mahindra Research Valley -- a research and development centre of the company -- will also house a test track.
Pawan Goenka, president automotive and farm equipment sector, M&M said, "We do not have a tractor plant in the south of the country. Besides our existing plants are running to full capacity. Chennai offers a great strategic location for setting up any capacity,"
Investment into setting up this new facility is part of the company's Rs 8,600 crore capital expenditure outlay, which it plans to spend over the next five years.
The company plans to expand this capacity in a phased manner starting with tractors that would have a capacity of 50,000 units per annum going upto 100,000 units in the second phase.
The company currently has a total installed capacity of 160,000-170,000 units per annum for tractors at four locations -- Nagpur, Chandigarh, Kandivali and Rudrapur. Only a part of the total land area will be used for the tractor facility.
M&M sold more than 165,000 tractors -- a growth of 47 per cent during the last financial year under the M&M and Swaraj brands.
Despite a near drought-like situation last year, the country saw one of the highest sales in tractors in many years.
Once the tractor plant is set up, the company will develop the remaining space for setting up a passenger vehicle unit for four wheelers and three wheelers.
This will involve further investments, but at a later stage.
The expansion plan by M&M is part of its long-term view of having capacities in place for future growth plans. The company's Chakan unit, which went on stream last year, has a similar expansion plan.
It has used only a part of the land and will develop the rest for future projects.
