Maruti Suzuki has signed a state support agreement (SSA) with the government of India’s Gujarat state to purchase land near Mehsana for a new factory.

The new factory will have initial annual capacity of 250,000 units with future expansion possible according to market demand. It is expected to start production in the 2015-16 fiscal year and will cost INR40bn (US$720.5m) for first phase land and plant construction.

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The new plant be a complete vehicle manufacturing facility and Gujarat has allocated around 700 acres of land for this factory.

“This land purchase by the company is in line with long term management view on expansion of its manufacturing facilities in India to meet future market demand. Based on the market demand the manufacturing facility near Mehsana will be added to the company’s existing manufacturing facilities at Gurgaon and Manesar in Haryana,” Maruti said in a statement.

The new factory will take the automaker’s combined manufacturing capacity to 2m units by 2015-16.

Gurgaon and Manesar combined can already build up to 1.5m units and the new Manesar C plant, adding 250,000, is due on stream in mid fiscal 2013-14.

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Maruti expects to employ directly about 2,000 people at Gujarat with the usual additional posts at local businesses and a planned supplier park.

“….vendors and ancillary suppliers are expected to invest in Gujarat at matching levels,” Maruti added.

“The new plant will be around 300km (200 miles) from Mundra port “and hence would be well suited for export initiatives.”