Eicher Motors on Tuesday said its two-wheeler division, Royal Enfield, will set up a new manufacturing facility at Oragadam, near Chennai, with an initial installed capacity of 1.5 lakh units per annum by March, 2013.

The proposed 50-acre facility is likely to see a total investment of up to Rs 350 crore over the next five years.

Tamil Nadu Chief Minister Jayalalithaa on Tuesday officially allotted land for construction of the plant at the Oragadam SIPCOT Industrial Park, near Chennai.

“We have received the letter for the land from the state government. We will start construction immediately after getting the possession. We should be ready with the plant by the first quarter of 2013,” Eicher Motors Managing Director and CEO Siddhartha Lal told PTI.

He said the new facility will have an initial installed capacity of 1.5 lakh units per annum, which could be expanded later, depending upon demand.

“With addition of new capacities, we will be able to reduce the waiting periods of our bikes. It is currently about 6-8 months,” Mr. Lal said.

Following operationalisation of the new plant, Royal Enfield will shift its entire vehicle assembly line here. At present, it has another facility in the state that produces 70,000 bikes every year.

“We will completely shift vehicle production in a phased manner to the new plant. Our plan is to utilise the old plant for developing and producing engines for the bikes,” Mr. Lal said, adding that engine manufacturing capacity will also be increased to 1.5 lakh units annually from 70,000 units at present.

When asked about the investment that the company is likely to make on the second plant, he declined to share details, saying, “We will have to take approvals from the board at first before telling any number.”

“Our long-term strategy is to invest for the next five years under a mega project on the same site,” he said.

However, an official statement from the Tamil Nadu government said the company had proposed to expand operations at a cost of Rs 350 crore.

Eicher Motors decided to set up its operations in the state, considering the “infrastructure facilities and conducive (business) atmosphere,” the official statement said.

It further said the latest venture from the company will ensure 900 direct and indirect employment opportunities.

On product development, Mr. Lal said: “We are constantly working on new products. We will introduce two new products in 2012-13. There will be no new bikes in this year.”

Talking about sales of Royal Enfield, he said the company expects to sell 70,000 units in 2011-12, compared to 53,000 units last fiscal.

Addressing the CII National Council meet last week, Tamil Nadu Chief Minister J. Jayalalithaa had said Chennai was all set to emerge as one of the top five global clusters with more automobile majors evincing interest in having their presence here.

At present, top auto companies, including German luxury car-maker BMW, Korean auto major Hyundai and U.S. auto-maker Ford, have established plants in the city and its suburbs.

Ms. Jayalalithaa had said with Chennai practically having everything that moves, from bicycles to battle tanks, tractors and even rail-road coaches, “Chennai is set to emerge as one among the Top Five global auto clusters.”

“My vision is to make the city the world’s largest auto cluster,” she had said.

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