Ford Motor plans to more than double its investment in India to produce a small car for the fast-growing local market and to build an engine manufacturing plant there.
The company is expected to announce on Tuesday that it will increase spending in India by $500 million, raising its total investment to $875 million, as it focuses on making the country a regional hub for small-car manufacturing. Car sales in India are growing by more than 20 percent a year, compared with 3 percent globally, and first-time buyers there are eager for cheap compact cars.
Several local and international automakers have recently announced plans to make a small car specifically for India, inspired in part by Tata Motors’ impending introduction of a $2,500 car.
Ford did not provide any information about what car it would produce in India, though it makes tiny Fiesta-model cars in Europe.
Ford has been struggling to reduce its reliance on North American markets, where sales are falling sharply, and to increase its presence in Asia’s booming markets.
The new investment follows similar moves made in Thailand and China in the last six months.
Expanding in India is “imperative” for Ford, said John A. Casesa, an industry analyst with the Casesa Shapiro Group. “The Indian market is already large, and it’s one of the fastest growing in the world.”
In remarks prepared for a news conference on Tuesday in Chennai, John G. Parker, Ford’s executive vice president for Asia Pacific and Africa, called the India investment a reflection of “the extraordinary potential” of India.
Chennai is already home to a Ford manufacturing plant. Ford employs more than 4,000 people in India and sold 42,000 cars in the 2006-7 fiscal year. The company sells four models in India, including the Fusion and the Ikon.
Ford will expand its Chennai plant to make a new small-car model within the next two years. A diesel engine assembly plant to be added at the same site will start making engines in April.
By 2010, Ford expects annual production in India to increase to 200,000 cars.
“India has become a priority market in Ford’s regional and global strategy,” Arvind Mathew, the president of Ford India, said in remarks prepared for Tuesday.
Competition for car buyers is increasing significantly in India, and thin profit margins on small cars leave new entrants like Ford with little room for error there.
Despite the risks, Ford shareholders would be upset if the company were not expanding in India, Mr. Casesa said, and growth there might help the company reduce its dependence on the volatile and competitive North America market.
