Renault and Indian auto maker Mahindra have signed a memorandum of understanding to establish a long-term strategic partnership.

Under the agreement, Renault and Mahindra will create a factory site with a capacity of 500,000 units per year within five years, offering products to customers in India.

The plans will extend the two manufacturer’s relationship, as they have already agreed to build Dacia Logan’s in India at the start of next year.

Carlos Ghosn, president & CEO of Renault, said: “I am delighted to announce the deepening and enlarging of our partnership with Mahindra in what I see as a great opportunity for Renault’s development in India. This gearing up of our presence in one of the fastest growing markets in the world is key to our commitment to international growth.”

Production at the new plant is expected to begin mid-2009, with an initial installed production capacity of 300,000 vehicles per year.