Hyundai is planning to setup a diesel engine manufacturing plant in India. The country’s second largest automaker currently imports diesel engines from Korea, resulting in a slight premium being charged on diesel Hyundai vehicles as the costs are higher. Now that the 2012-13 Union Budget is out and there is no additional tax on diesel vehicles, Hyundai is considering an investment of close to Rs. 500 crore in setting up a diesel engine manufacturing facility, mostly at its plant in Sriperumbudur near Chennai. The company could even look at Gujarat for this diesel facility.

Hyundai plans to make an announcement in this regard in the coming month and is looking at producing atleast 1.5 lakh diesel engines every year. The engines which will be manufactured could include the recently unveiled 1.1-litre 3-cylinder diesel engine, while the 1.4-litre diesel engine found on the i20 hatchback and base Verna diesel and the 1.6-litre diesel engine powering the Verna are surely going to be produced at this upcoming diesel engine facility.

Just recently we posted about the next generation Hyundai i10 (read here), which will be launched in 2013 and that it will get the 1.1-litre diesel engine (75 PS power, 180 Nm torque) which was recently unveiled at the Geneva Motor Show. This news only confirms this development as the only reason why Hyundai is currently not offering a diesel engined i10 is that importing the engines from Korea pushes up the cost of the vehicles significantly, which would in turn make the i10 diesel quite uncompetitive. With locally produced diesel engines, the i10 could finally get a diesel heart.