India's Bajaj Auto Ltd will set up a join venture (JV) with the Renault-Nissan alliance to produce and market small cars - but priced higher than Tata Nano, the companies announced Monday.

While Bajaj Auto will hold 50 percent in the new entity, Renault and Nissan will share the balance equally.

The small cars will be produced at a new plant to be built in Chakan, Maharashtra. Sales will start in early 2011 in India, the companies said.

For Bajaj Auto, the project is important as Tata Nano will be a serious threat for its three wheeler business.

In another development, a Renault official told IANS that the Renault-Nissan joint venture, set up to manufacture mid-sized cars, has started levelling the ground at its plant near Chennai.

Bulk of the required 670 acres for the 400,000-unit capacity plant at Oragadum has been acquired, said the official, who wished not to be identified.

The company is expected to do the 'bhoomi puja' early next month and start commercial production during the first quarter of 2010.

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