Chennai:  South Korean automaker, Hyundai Motor Company, has signed a five-year agreement with Caparo India to produce and sell the famed luxury bus, Hyundai Aerobus in India, tapping the rapid-growing commercial vehicle market in the country.

Under the agreement, an assembly plant will be set up in southern India with an annual capacity of 1,500 buses. Hyundai will provide parts and production technology for the buses while Caparo India will manufacture and sell the vehicles, Hyundai said in a statement.

The facility to be set on 20 acres will employ 200 people initially. The Aerobus will come in three variants with powertrains in the 320-380 HP range.

India's commercial vehicle market stood at 290,000 units last year, including 5,000 premium buses. Sales of trucks and buses gained 2.9 per cent to 430,555 units between April and February, said the Society of Indian Automobile Manufacturers.

Hyundai is in talks with Indian firms for a possible venture for commercial vehicles, to market for higher-end buses, to be mainly used for tourism. The company expects to reach 10,000 units in 2010.

Caparo is evaluating locations such as Sriperambadur, Oragadam and Nellore in the south to set up the plant and expects to fix ona location in three months.

Caparo India country head Sunil Pahilajani said that the plant, which will operate as a wholly-owned subsidiary of Caparo India, under its division Caparo Vehicle Products India, will commence production in the last quarter of 2008-09. 

Caparo India is part of the London-based Caparo group, which has a 1bn Euro turnover. The group
has more than 40 companies operating in countries, including India, Canada and Spain

Hyundai is South Korea's largest automaker with operations in China, India, Turkey and the US. The aims to increase sales from its Indian factory by 62 per cent to 530,000 units this year.