The company has also entered into a joint venture agreement with US-based Navistar International Corp to manufacture diesel engines in India at an investment of $90 million over the next five years.

"Given the growing opposition to SUVs in the United States, we have a plan to market hybrid SUVs," M&M managing director Anand Mahindra said at a conference on climate change.

The company has said it will begin selling its Scorpio SUV in the US from 2008.

International Truck and Engine Corporation, a subsidiary of Navistar International Corporation, signed the joint venture agreement with Mahindra and Mahindra to manufacture diesel engines for medium and heavy commercial trucks and buses in India, M&M said in a filing with the Bombay Stock Exchange (BSE).

The joint venture, to be named Mahindra International Engines Ltd (MIEL), would be owned 51 per cent by the Mahindras and 49 per cent by Navistar, the company said.

"Our plant in India will produce world-class engine models for both the Indian and global export markets. The JV will not only extend our existing partnership with Navistar but the resulting synergies will also see MIEL emerge as a force to reckon with in the global OEM market," Mahindra said.

The new company''s technologically advanced diesel engines will power full line of trucks and buses produced by a planned JV in 2009.

M&M plans to source up to 85 per cent of engine components locally.

Navistar is North America''s largest combined producer of commercial trucks, buses and mid-range diesel engines.