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Vietnamese electric vehicle (EV) maker VinFast signed an agreement on Saturday to set up its first manufacturing facilities in India, as the ambitious company seeks to penetrate the world's third-largest vehicle market.

VinFast and the southern state of Tamil Nadu agreed to work toward an investment of up to $2 billion, with an intended commitment of $500 million for the first five years of the project, according to a joint statement.

Construction on the project's EV and battery manufacturing plants is expected to start this year and generate 3,000 to 3,500 jobs locally, the statement said.

Reuters reported on Wednesday that VinFast would open its first Indian manufacturing facility in Thoothukudi in Tamil Nadu, where it would make EV batteries.

Founded in 2017 and making EVs since 2021, VinFast has announced numerous EV growth plans overseas. The company made its Nasdaq debut in August and first flagged its Indian expansion plans a month later.

Tamil Nadu's capital, Chennai, dubbed the Detroit of Asia, and other districts host several EV players, including Indian two-wheeler makers Ola Electric and Ather, and China's BYD.

VinFast said the Tamil Nadu project was expected to evolve into a first-class EV production hub in the region, with an annual capacity of up to 150,000 vehicles, compared with 250,000 at its main plant in Vietnam. The joint statement did not specify the capacity of the battery facility.

Electric models accounted for just around 2% of India's car sales India last year, but the national government is targeting 30% by 2030 and is working on a scheme to attract EV makers.

The Tamil Nadu government committed to providing cleared land for the manufacturing facilities, uninterrupted power supply and other infrastructure support, the statement said.

VinFast said it also plans a nationwide dealership network.