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Product planning chiefs from Renault and Nissan have signed a formal Memorandum of Understanding that commits the pair to setting up a joint car manufacturing plant in the state of Tamil Nadu in India.

The pair intend to build a production plant at Oragadam near Chennai with an installed capacity of 400,000 vehicles a year. Under the original plan, Indian group Mahindra & Mahindra was also to be involved in the plant, but it pulled out of the scheme at the start of this year.

Renault and Nissan are committed to investing €780 million in the plant, with production due to begin in 2010. Most of the vehicles produced at the plant will go to the Indian market, but Nissan is also looking to export from it.

Patrick Pélata, executive vice-president for product, plan and programmes at Renault, said: "India will play a key role in Renault's growing global presence. With the Chennai plant, Renault wants to build a full line-up for India, following the current success of Logan."

Renault has been selling the Logan in India in a joint venture with Mahindra since May 2007 and at the end of January the car had achieved 12 per cent market share in the C segment in India.