It's the first time Daimler, which also makes Mercedes cars, will build trucks designed for the Indian market in India, bringing it into competition with Tata Motors, India's top commercial vehicle manufacturer.
The company says the factory will start commercial production in the third quarter of 2012, with an initial capacity of 36 000 vehicles. The maximum capacity of the Chennai factory will be more than 70 000 a year.
Coming To Africa
Daimler chairman Dieter Zetsche said in a statement: "It is the only Daimler plant in the world that houses products which combine Indian engineering with German and Japanese DNA under a single roof. This way, we are optimally positioning ourselves for one of the world's strongest and fastest-growing truck markets."
The factory will employ 1400 people and allow Daimler to build trucks using 85% local components, crucial for containing costs.
Daimler is also investing in research and development and has built a test track, with a rough-road circuit designed to mimic India's gruelling roads. The company said that by 2014 it would produce 17 truck models in India, the world's third-largest commercial vehicle market.
Its line of BharatBenz trucks is tailored to appeal to cost-conscious Indian consumers.
Marc Lilstosella, chief executive officer of Daimler India Commercial Vehicles, said the factory would start exporting as early as 2013. The first target markets will be Asia and Africa.
Daimler plans to move assembly of its Actros premium heavy truck to Chennai from its factory in Pune, in the Indian state of Maharashtra, where it also assembles Mercedes-Benz cars.