The plant initially had an installed manufacturing capacity of 200,000 engines and 100,000 cars.

The capacity is scheduled to be doubled given the demand for Palio hatchback's petrol and diesel versions, Tata Motors' [Get Quote] new Indica and proposed launches including Fiat's Linea and Punto.

Jayanta Kumar Deb, V-P, engineering development, Fiat India Automobiles, said, "We are especially targeting the international engine supply contract, which has grown to a sizeable amount by now. We are in talks with global manufacturers ....the Ranjangaon facility is huge and has the capacity to expand significantly, we can easily cater to the domestic and international market from there."   

The executive refused to comment on the actual size of the Ranjangaon plant, but hinted at more investments from both the players to facilitate expansion in the immediate future.

Both companies had committed a corpus of Rs 4,000 crore (Rs 40 billion) at the time of the joint venture on an equal sharing basis.

The plant will produce the famous 1.3 litre and 1.9 litre multi-jet diesel engines, besides two gasoline fired engines - 1.2 and 1.4 litre - belonging to Fiat's Fire family of engines. The engines will be shared by the Fiat and Tata Motors models.

Similarly, Suzuki Powertrain India (SPIL), a subsidiary of Suzuki, will manufacture and export Suzuki engines (both petrol and diesel) to the parent company's global locations.

According to analysts, it is 30-40 per cent cheaper to manufacture engines and parts in India than in any of the European or US markets. "Cheap labour and material costs are the most attractive factors for global makers in India", said a city-based analyst.

Fiat was supplying engines to Suzuki for the latter's Swift model sold in the European region before the Japanese company decided to start its own engine exports from India.

The relatively low manufacturing costs will enable the Italian automobile maker to post better margins despite a slowdown in key markets such as the US, Europe and Japan.