The 50:50 joint venture, located at Ranjangaon in Maharashtra, will manufacture passenger cars, engines and transmissions for Indian and overseas markets.

The greenfield facility would involve an overall investment exceeding $650 million, Tata Motors said in a statement.

"The progress of all the joint initiatives between the Fiat group and Tata Motors reflects the strong potential of our relationship in India and abroad," Tata Motors managing director Ravi Kant said.

The JV will manufacture Fiat`s premium cars, Grande Punto and Linea (in the B and C segments), its 1.3 litre multijet diesel engine, 1.2 and 1.4 litre FIRE gasoline engine and matching transmissions, the statement said.

The facility would also be used to roll out Tata`s next generation vehicles.

Production at the Ranjangaon unit is expected to exceed 100,000 cars and 200,000 engines and transmissions. The plant will directly and indirectly employ over 4,000 people, it said, adding, assembly of the new Fiat Palio has already commenced at the plant.

Ravi Kant will be chairman of the joint venture while Alfredo Altavilla, CEO of Fiat Powertrain Technologies and senior vice-president business development of Fiat Group, will be the vice-chairman. Rajeev Kapoor has been appointed as the president and CEO of the new entity.

The two companies already has an alliance under which Tata Motors mange distribution and service of Fiat branded cars in India.