In a move that will help clear backlog, Tata Motors has opened a new plant that will build the “world’s cheapest car” in the western Indian state of Gujerat. The Sanand factory will initially produce 250,000 units of the Tata Nano per year, with plans to eventually ramp up annual production to 350,000.

After the hype surrounding the Nano’s launch, demand was high and Tata collected 206,703 orders during the initial sales period last April. From this, 100,000 customers were chosen by a lottery. Deliveries of the cars began in July, and up till April 2010, 33,875 units have been accounted for.

The original dedicated Nano plant in Singur, West Bengal, was delayed after the automaker halted construction due to violent protests by farmers who originally worked on the land. Tata abandoned the near-complete facility in October 2008 and began building the Sanand facility on a 445-hectare plot.

One of the possible reasons Tata cannot take its own sweet time is that the ultra-cheap Nano will have some rivals soon. The Renault-Nissan Alliance and Bajaj Auto are teaming up for a $3,000 car that is projected to hit showrooms in 2012. They have earmarked a plant in Maharastra that will have a production capacity of 400,000 vehicles a year. Bajaj is a huge company that produces motorcycles and auto rickshaws.

The basic Nano, with one wiper, no radio or air conditioning costs $2,615 in New Delhi. A better equipped version will go on sale in Europe late 2011.