The company has a tie-up with Japanese company Nissan for setting up the plant. In October, both the players signed a Master Cooperation Agreement for formation of three joint venture companies supporting the LCV business. “As of now Ashok Leyland and Nissan have agreed for a site in Tamil Nadu,” the official said on condition of anonymity. “The plant would have a production capacity of 1 lakh units per year to begin with. Eventually, it would be scaled up to 2 lakh,” the official said.

In the vehicle manufacturing company, Ashok Leyland would have 51 per cent share and the rest would be held by Nissan. Production at the Tamil Nadu unit is expected to begin in 2010 and would include the new generation Nissan light-duty truck. The LCV includes 1.2 tonner to take on competition from Tata's popular Ace.

The company proposes to manufacture 2 tonner and 3 tonner LCVs, besides 6-8 tonner vehicles in the new plant. Both the partners would also set up a powertrain manufacturing firm that would make and assemble engines and drive-train components to be fitted in LCV products for both the domestic and export markets. In the powertrain manufacturing company, Nissan would have 51 per cent share and Ashok Leyland 49 per cent.

The third company to be set up by the two firms is for technology development. It would be responsible for development of LCVs and related powertrains for Indian and select global markets.

The products developed would be sold under both Ashok Leyland and Nissan brands. Ashok Leyland managing director R Seshasayee, two days ago at the Delhi Auto Show, said: “We had identified three locations, now we have shortlisted two — Tamil Nadu and Andhra Pradesh.”