Tata Motors has threatened to pull out of West Bengal state where it is building a factory to roll out the world's cheapest car, Nano.
Opposition groups have been protesting violently for over two years, accusing the state government of taking 997 acres of farmland at Singur by force.
In January, a court dismissed claims that land was acquired illegally.
The Nano car, priced at $2,500, was unveiled by industrialist Ratan Tata earlier this year.
The building of the Nano factory is well under way.
The Tata group was aiming to start selling the car in mid-2008, but it has been delayed because of the protests.
West Bengal's Marxist government is trying to attract investment to rejuvenate the state's ailing economy.
'Not conducive'
"We are deeply concerned about the violence, disruption and the safety of our employees, equipment and investments at the project site," chairman of the group Ratan Tata told reporters in the state capital, Calcutta.
"Obviously it is not a conducive atmosphere. The compound wall has been broken down, materials stolen. We cannot operate a plant with police protection. If this happens even before we start production, then what would happen later?" Mr Tata asked.
Recently, several engineers and workers at the factory were threatened by opposition groups after which most of the workers fled and the construction work almost came to a halt.
"It is for the people of West Bengal and Calcutta to decide whether we are unwanted, or to accept us as a good corporate citizen. If we are unwanted here, then we would have to make a move," he said.
Tata Motors has already invested 15 billion rupees ($343m) in the small car project.
"Whatever be the cost, we will move out if the situation demands so," he said.
The opposition Trinamul Congress party which is heading the protests against the project says the state government has acquired farmland by force.
The party is insisting that the company return 400 acres of land earmarked for ancillary units to farmers who are not willing to part with their land.
The company says it is necessary to keep the ancillary units in the same location to keep the costs low.
With the state government refusing to accept the opposition's demands, a deadlock has been created leading to a rise in tension and violence in the project area.
Trinamul leader Mamata Banerjee has said they would go ahead with their planned sit-in protests around the Tata factory from Sunday.
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