BOMBAY –

Nissan Motor Co. and its parent, Renault SA, have begun building a factory in India to challenge Suzuki Motor Corp.'s dominance in the country.

The $1.1 billion factory will begin production in 2010 and have a capacity to make 400,000 cars annually for local and export markets, the automakers said in a statement Friday in Madras in south India, where the plant is being built.

Nissan, the nation's third-largest automaker, will make the Micra model and other cars at the factory while Renault will produce cars based on the Logan and other platforms.

Renault, with 2.2 percent of the local market, and Nissan have lagged behind rivals in expanding into India, where Suzuki has a 50 percent share. Automakers including General Motors Corp., Ford Motor Co. and Volkswagen AG have already announced a combined $6 billion in investments in the country, where car sales may double by 2013.

"Those who have a foot in the door now can capitalize on it later," said Ashutosh Goel, an analyst at Bombay-based brokerage Edelweiss Capital Ltd. "There's a large domestic market for compact cars, and the cost of manufacturing is also lower."

India's automobile market will double to about 4 million vehicles, according to Global Insight Inc., an industry consultant. Expansion in the world's fastest-growing major economy other than China helped local car sales double in the past five years to a record 1.2 million units in the year that ended on March 31, according to the Society of Indian Automobile Manufacturers.

Nissan and other automakers are expanding in India as demand slows in Japan and the credit market turmoil and surging oil prices stunt sales in the U.S. Building local factories, as opposed to imports, will enable Nissan and Renault to sell cheaper cars.