Indian business conglomerate and auto maker Mahindra group has inaugurated an automotive assembly plant with a production capacity of 5,000 units per annum at Welipenna, near Colombo in Sri Lanka.

The assembly plant, set up in collaboration with Ideal Motors of Sri Lanka, is spread over 4 hectares and will localize four components namely battery, tyres, seats and exhaust, providing employment to around 200 people directly and indirectly over the next two years, the auto maker said in a statement late Saturday.

In April 2018, the two companies had formed a joint venture to set up the plant, wherein Mahindra held 35 percent stake while the remaining 65 percent was with Ideal Motors who have now been a Mahindra distributor for past 10 years.

Calling the new plant a major milestone for Mahindra's foray in Sri Lanka, Pawan Goenka, managing director of Mahindra & Mahindra Ltd. said, "I would like to thank the government of Sri Lanka for their unstinted support and I am very optimistic that this new assembly plant will not only add to industrial growth in the country but will also generate significant employment opportunities at our plant and at supplier's end".

At the inauguration, it rolled out the compact SUV - KUV100 and will further roll out a slew of products over the next three years, the statement said.

"With this local assembly unit, we will now be able to deliver products in reduced time and at more affordable prices," said Aravinda de Silva, deputy chairman of Ideal Motors.

This plant, a project of national importance will definitely encourage investment in manufacturing and development, to further Sri Lanka's economic upliftment, Silva said.

In the recently concluded April-June quarter, Mahindra sold 123,690 passenger vehicles and 82,013 tractors, down 5 percent and 15 percent respectively in sync with economic slowdown, over the corresponding quarter last year.

Sri Lanka has been Mahindra's top three export markets globally.