Hyundai, India's second-largest carmaker, is running its Indian operations at full capacity and has lost market share over the past year due to a lack of diesel models, which are popular thanks to government subsidies on the fuel.
"This investment will help us meet the growing demand of diesel vehicles in India and reduce the waiting period," Bo Shin Seo, managing director, Hyundai Motor India, said in a statement.
The South Korean carmaker gave no details of the proposed engine plant's capacity, or when it would start production.
Hyundai said it was set to sign a memoradum of understanding with local authorities on November 5 to make the investment at its sprawling production site in Chennai in south-east India.
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Hyundai invests $300 million in India manufacturing
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