Nissan’s rumoured investment in India appears to be closer to coming to fruition, with reports that the Japanese company is planning to invest US$840m in the country.

The Nikkei business daily reported that Nissan is considering possible locations in two or three coastal cities in western and southern India for a new assembly plant. The company is reportedly negotiating with local governments and could make an announcement as soon as later this month.

The plant would have annual capacity of 200,000 units a year and would start producing one-litre cars in the second half of 2009.

30% of the cars would be for the domestic market with the remaining 70% shipped to Europe and other markets. The plant would gradually be expanded to 400,000-unit annual capacity and further models would be added.

Nissan is currently a very minor player in the Indian market. It exports just 200 vehicles a year there from Japan. In September last year Suzuki announced that its Indian subsidiary, Maruit Udyog , would produce 50,000 cars a year for Nissan. This is part of a broader agreement between Nissan and Suzuki to share manufacturing facilities.

Reuters has reported that Nissan is also considering being a part of a planned joint project between Renault and Mahindra & Mahindra to build a new plant to assemble 300,000 cars a year from 2009. Nissan’s decision on that is expected by the beginning of March. Renault and Mahindra & Mahindra also plan to start producing the Logan from 2007.

Nissan’s new manufacturing investment would be coupled with an investment in the dealer network to open around 100 outlets by 2010, according to the Japanese newspaper.

Toyota and Volkswagen are rumoured to be developing small cars for the Indian market to compete with domestic best-sellers from Maruti and Tata. This latest project appears to be Nissan’s entry in the sector.