Tata Motors is close to choosing Indonesia over Thailand as the Asean production base for its 600cc Nano mini-car, according to reports originating in Thailand.

Although Tata already assembles its Xenon pickup truck and Ace light truck at a plant in Samut Prakan, Thailand, sources close to the company are reported to have suggested that better incentives and a more stable political outlook will likely swing the decision in Indonesia’s favour. 

The company also thinks that the local Indonesian market looks more promising for the Nano, with the government expected to introduce lower taxes on small, fuel efficient cars over the next two years.

Tata is believed to be in discussions with PT Astra International, Indonesia’s largest vehicle distributor, over a production partnership for the car. 

The report suggests that Tata plans to produce up to 50,000 Nanos per year in Indonesia, with operations starting in 2013. The car also would be exported to Thailand, Malaysia and the Philippines.

The Indian carmaker last year withdrew from the Thai eco-car programme amid concerns that it would not be able to meet the 100,000-unit minimum output that is required within five years in order to qualify for the special tax incentives.