Driven by a spurt in volumes in the last two-to-three years, coupled with an increasing demand for ?deluxe? motorcycles and scooters in India, India Yamaha Motor, a subsidiary of Japanese auto giant Yamaha, has decided to drive into Tamil Nadu for its third plant, considered to be the largest in the Asian region.

The company on Monday entered into an agreement with the Tamil Nadu government to set up a new plant near Chennai with an estimated investment of R1,500 crore. The agreement was signed in the presence of chief minister J Jayalalithaa on Monday at the secretariat.

?We are bullish on the Indian market, particularly on the scooter segment. The plant near Chennai, to commence from early 2014, will have an initial capacity of 400,000 units per annum and then the capacity will be scaled up to 1.8 million units per annum by 2018. This plant will become the largest in the Asian region for us and we have earmarked to invest R1,500 crore over five years,? Hiroyuki Suzuki, chief executive officer and managing director, India Yamaha, said. Suzuki said that the plant is coming up at an industrial part in Vallam Vedagal (Sriperumbudur) near Chennai on 125 acres of land.

Suzuki said that the company will be developing a vendors? park near the plant. ?We expect at least six Japanese auto parts vendors to put up plants and a similar number of domestic suppliers will invest too. We expect at least R500 crore worth investments from these vendors/suppliers on their new projects initially.?

?We have decided to start with scooter production in our Chennai plant as this region (southern), particularly Tamil Nadu, is a big market for scooters. We showcased the prototype of ?Ray? scooter at the Delhi Auto Expo in January and it will be manufactured in our Chennai plant. Ray will be initially launched from our existing plant in Surajpur in UP during the festival season,? said Riuji Kawashima, deputy managing director, India Yamaha.

According to Kawashima, the plant will be utilised for both domestic as well export sales purpose. ?In 2011, the company exported nearly 1.9 lakh units out of the total sales of 5.2 lakh units. We are targeting 23% growth in 2012 sales to 6.4 lakh units with similar export figures. The industry is projected to touch 20 million units per annum by 2016 and we are targeting 10% market share or 2 million units sale,? Kawashima said.

The company has set its focus on deluxe motorcycle (above 150 CC) and scooter segments, Kawashima said, adding, ?The scooter is being designed and developed exclusively for India by the Indian team. The deluxe bike segment is estimated to be around 1.5 lakh to 1.8 lakh units per month and Yamaha is leading with 17% market share, which will go up to 20% in 2012.?

He said that the Yamaha parent company has started ?global sourcing? from India recently for its global operations and accordingly plans to source 1.2 lakh engine sites this year from India.