Renault has unveiled plans to boost its joint-carmaking venture with Indian manufacturer Mahindra & Mahindra.
Renault hopes its budget Logan car will drive growth in India
The French carmaker said it planned to build a new factory in India with the aim of supplying the fast-growing Asian economy with up to 500,000 cars a year.
The jointly-owned assembly plant will produce the no-frills Logan car exclusively for the Indian market.
Renault boss Carlos Ghosn said the firm's Japanese partner Nissan was also considering joining the project.
Nissan - which is also run by Mr Ghosn - announced on Thursday that it was pulling out of talks to build a new assembly plant in India with fellow Japanese carmaker Suzuki.
Renault is keen to boost its presence in emerging economies such as India, China and Brazil.
Sales in the firm's core European markets have been sluggish, and Renault has set itself the target of increasing global car sales by 800,000 a year by 2009.
"We'd better succeed in India if we want to reach our 800,000," said Mr Ghosn. "India is one of the fastest-growing markets which offers significant opportunities for profitability."
The Renault boss said the cost of building the factory would be "much lower" than the $1bn which had been rumoured.
"The strengths of Mahindra and Renault will go a long way in making India a key global automotive market," added Anand Mahindra, vice chairman and managing director of Mahindra & Mahindra.
Production at the site is due to begin in 2009.