Nissan signed a $500 million (£243 million) joint venture with Ashok Leyland yesterday to produce light commercial vehicles in India. Nissan, Japan’s third-largest carmaker, said that separate talks with Bajaj Auto to develop an ultra-low-cost car were progressing “in a favourable direction”.

Carlos Ghosn, the chief executive of Nissan, is in India this week for a concerted push into one of the world’s fastest growing car and truck markets, which the company entered this year through a £495 million agreement with Renault and Mahindra & Mahindra of India to make 400,000 vehicles in Madras from 2009. Toyota and Honda, Nissan’s rivals, have a ten-year headstart.

The deal with Ashok Leyland, owned by the Hinduja Group, covers three ventures in manufacturing, engine and components assembly and technology and expands Nissan’s manufacturing base in India. It is the Japanese company’s second attempt at the light truck market in India after a failed joint venture in the 1980s.

The vehicle manufacturing company will be 51 per cent owned by Ashok Leyland, India’s second-biggest bus and truck maker, and 49 per cent by Nissan. Production will start in 2010, with volume forecast to grow beyond 100,000 units a year in the medium term.

The joint venture will make the new generation Nissan Atlas F24 light duty truck and other 2.5 tonne to 8 tonne vehicles for the Indian and export market. Nissan, which last year reported its first fall in operating profits for six years, is seeking a greater presence in India to take advantage of low labour costs and an economy growing at about 9 per cent a year.

Mr Ghosn, who has since turned round Nissan’s fortunes with interim operating profits rising 5.3 per cent to $3.1 billion, plans to establish India as a manufacturing hub. He said: “The light commercial vehicle business is one of Nissan’s most important global growth engines.”

Under the deal, Nissan and Ashok Leyland will use each other’s dealer networks in an increasingly competitive market being eyed by Daimler and Scania. It is Ashok Leyland’s first foray into the light truck market as it attempts to close the gap with Tata Motors, India’s biggest commercial vehicle maker.

“We wanted to be in all ranges,” Gopichand P Hinduja, Hinduja group president, said. “With infrastructure being developed, the future is heavy duty [vehicles] but that will take much longer. Now, light trucks are more convenient for the cities. It is the highest volume market.”

Sales of commercial vehicles in India have risen by more than 20 per cent a year in the past three years to about 500,000 units, on the back of better infrastructure and stricter safety and emission rules.

Nissan, together with its partner Renault, is in talks with Bajaj, India’s number two motorbike maker, about building a $3,000 car aimed at converting millions of Indians from two wheels to four.

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