Hyderabad: Isuzu Motors India Pvt. Ltd, a wholly owned subsidiary of Japanese auto maker Isuzu Motors Ltd, plans to set up a light commercial vehicle (LCV) manufacturing plant in Chittoor district of Andhra Pradesh at an estimated cost of 1,500 crore.

The plant, which will produce 120,000 units annually at peak capacity, will commence operations towards the end of 2015 or the beginning of 2016, Shigeru Wakabayashi, deputy managing director of Isuzu Motors India, said on Friday after signing an in-principle agreement with the Andhra Pradesh government to set up the plant.

The manufacturing facility will come up on 430,000 sq. m of land at Sricity, an integrated business city 55km north of the automotive hub of Chennai.

The plant, when commissioned, will become the second manufacturing facility for Isuzu, Japan’s oldest vehicle manufacturer, founded in 1916, to produce LCVs globally. Isuzu’s Thailand plant (with an annual capacity of 300,000 units) is the only facility now producing LCVs. Isuzu sells its vehicles in 100 countries around the world.

Once the plant achieves full capacity, 80,000 units will be manufactured for the domestic market and 40,000 units will be exported, Wakabayashi said.

While the plant is being built, Isuzu is exploring options on whether to import a completely built unit (CBU) from its Thailand factory, or whether to assemble completely knocked down (CKD) units in collaboration with a local manufacturer. Wakabayashi identified Hindustan Motors Ltd as one of the companies Isuzu is in talks with for setting up temporary operations while its main plant is being readied.

“The coming 10 years is actually a golden period. The Indian market in coming 10 years will be expanding from 3.6 million units to 10 or 15 million units... Therefore, we are coming to India at the right time," Wakabayashi said.

This is the second major investment by an automotive company in Andhra Pradesh after Mahindra and Mahindra Ltd, which opened its tractor facility in Medak district last week.

“We hope this will set the ball rolling for us," major industries and export promotion minister J. Geeta Reddy said. “We have been running after automotive manufacturers, but somehow it has been eluding us. With Mahindra and now Isuzu, I am sure the jinx is over and we will be zooming ahead of Tamil Nadu, Gujarat and Maharashtra," she said.

Reddy said the plant will employ 2,000 people initially and 6,000 in the long term as it reaches full capacity.