MUMBAI – After exploring sites and incentives in four Indian states for more than two years, PSA Peugeot Citroen has decided where to build an Rs17.3 billion ($890 million) plant capable of producing 300,000 units annually.

PSA, Europe’s second-biggest auto maker and sixth-largest in the world, will locate the new facility in Sriperumbudur, near Chennai where Ford, Renault-Nissan, Hyundai and BMW already have plants.

The French auto maker projects it will create 20,000 direct and indirect jobs.

PSA has more than 10,000 dealer outlets in 160 countries, but markets in developed nations have become saturated. It now aims to increase sales in China, Russia and India, from a combined 39% to 50%.

As a first step toward regional expansion, the company set up a plant in China. Gregoire Olivier, the auto maker’s CEO of Asian operations, says it’s PSA’s “intention to become a good player” in India.

Indian officials have pledged government support for speedily implementing the manufacturing project in Chennai, bolstering PSA’s second bid for a foothold in India.

PSA’s joint venture with Premiere Automobiles more than a decade ago sold more than 10,000 cars in its first year, but the JV lost $20 million the next. The subsidiary was dissolved after seven years in 2001.

That same year, efforts by PSA to form a luxury-car JV with Tata and a 2-wheeler partnership with Hero Honda fizzled.

PSA officials won’t talk about the new investment or products for India. Reports indicate the auto maker may bring a C1 compact from its Citroen brand.

The company also may vie for a share of the luxury segment with the Peugeot 508 sedan, which was launched in China earlier this year.

Cars built here will be sold both in Indian and overseas markets, using parts supplied by French and other European companies.

PSA is facing off against a stronger slate in India the second time around, including Volkswagen, Renault-Nissan, Toyota Kirloskar, Ford India and General Motors India, half of which now is held by China’s Shanghai Automotive.