India Yamaha Motor Co plans to set up a scooter manufacturing facility at Vallam Vadagal on the outskirts of Chennai.

The company today signed a memorandum of understanding with the Tamil Nadu Government to this effect.

Mr Hiroyuki Suzuki, CEO and Managing Director of India Yamaha Motor, said the company will invest Rs 1,500 crore over the next five years in the project. The facility, to be ready by January 2014, will initially manufacture scooters. It will have a capacity of four lakh units a year. The production will then be increased in stages to 18 lakh units annually by 2018.

Mr Suzuki said the facility will employ 1,800 people and this will go up to 6,500 over the next five years. The company now has production facilities at Surajpur (UP) and Faridabad (Haryana).

“We also intend to have a vendor park in the vicinity of this facility,” said Mr Roy Kurian, National Business Head – Sales, India Yamaha Motor.

The Indian two-wheeler industry sold over 130 lakh units in 2011.. Yamaha's sales last year was 5.2 lakhs units including including exports. It hopes to sell 6.4 lakh units in 2012. To keep pace with the current growth in demand, the company is in the process of expanding its capacity to 10 lakh units from the present 6 lakh units. with an investment of Rs 750 crore.

By 2018, the company will have total production capacity of 28 lakh units including 18 lakhs in Chennai.

“We expect the Indian two-wheeler market to attain 20 million units by 2016, when we target to sell 2 million units,” said Mr Suzuki.

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