Suzuki Motor Corporation (SMC) plans to shift the production base for its small cars to India, leaving its facility in Hamamatsu, Japan to solely serve the home market, reports The Financial Express.

Its subsidiary Maruti Suzuki India’s future Gujarat factory is set to be the new export hub for the Japanese company’s entire small car range. When completed, the facility is expected to be capable of producing 1.5 million cars a year at full capacity.

“Small and large car exports from Japan have already become uncompetitive because of the appreciating yen so Suzuki is instead shifting small car production to India,” Maruti Suzuki India chairman RC Bhargava told the publication, adding that the company does not seek a reduction in import duties in any revised trade agreement with Japan.

Other reasons for the move include a highly developed component vendor base and supply chain for small cars in India, lower labour costs and the coastal location of Gujarat which makes it suitable for exports.

“We have already bought two tracts of land – 640 and 470 acres – for about Rs 450 crore and they are about 18-20 km apart. The final clearance on the first phase of Rs 4,000 crore investment is expected from the board in January, after which construction will start,” a company official told The Financial Express. Maruti plans to invest about Rs 8,000 crore in the 1,110 acre Gujarat facility.

Frost & Sullivan managing director for South Asia VG Ramakrishnan told the publication that this move would allow Suzuki to sell more products in India, such as the 600 cc kei cars it sells in Japan.

“It’s a fairly smart move for Suzuki and significant for profitability. They just have to make sure that local labour issues don’t disturb global operations later. Car companies have to make India a hub to make India work as a market – because to keep prices low at home, they have to have high volumes.”

Ramakrishnan also said the Japanese company has a huge first-mover advantage in India because of Maruti’s dependent and loyal suppliers who will invest more for the company.