Ford plans to invest $1bn in India plant

Ford would also invest $72m to increase production at its plant in southern Indian city of Chennai [GALLO/GETTY]

Ford Motor Co has said it plans to invest $1bn to build a factory in India, doubling its investment in the country as the US carmaker seeks to gain a greater share in the second-fastest growing car market in the world.

The planned factory in western Indian state of Gujarat, expected to be up and running by 2014, will employ 5,000 people and is expected to have an initial annual capacity of 240,000 vehicles, the company said on Thursday.

“We are aggressively expanding in markets around the world that have the most growth potential in order to offer more of the fuel-efficient, high-quality vehicles from our global portfolio that customers in markets like India want and value,” Michael Boneham, president and managing director of Ford India, said in a statement.

Boneham said the company currently has four plants under construction in China and one in Thailand, apart from the ones in India.

“These new state-of-the-art facilities will help us reach the goal of increasing worldwide sales by nearly 50 per cent by mid-decade to about 8 million vehicles per year,” he said.

Ford has been seeing increased demand for its compact Figo model, which it began exporting in August last year.

The car maker sold more than 60,000 units, including exports, in the first six months of 2011, a year-on-year growth rate of more than 50 per cent.

The company, which also sells the Fiesta sedan, recently said it would invest $72m to increase production capacity at its engine assembly plant in the southern Indian city of Chennai to support its sales and export growth plans.

Cars sales fall

An industry body said earlier that demand for cars in India is expected to fall more than predicted this month, as rising interest rates and fuel prices force consumers to tighten purse strings in Asia’s third-largest economy.

Indian car sales, which grew at a breakneck 30 per cent in the fiscal year that ended in April, are now expected to grow by just 10 to 12 per cent this fiscal year, down from an earlier forecast of 16 to 18 per cent, an industry group forecast.

Several global car companies in India such as Toyota, Nissan, Volkswagen and
General Motors are lining up new models and boosting investment in the country with a focus on exports.

Foreign car manufacturers, however, continued to post rising sales, driven by exports. Many are relatively new entrants to India and have lower bases of comparison.

The Indian unit of Toyota posted a 94 per cent rise in June sales, driven mainly by a big increase in sales of its Etios sedan, which accounted for nearly 50 per cent of its sales.

Nissan saw sales rise 21 times from a year earlier, with domestic sales at 1,632 cars and exports of 9,072.

In April, General Motors’ India unit said it aims to grow at twice the rate of the country’s vehicle sector in 2011, while Hyundai Motor Co’s Indian unit said sales will rise 15 to 17 per cent this year.

India, with its high economic growth, remains attractive for car companies and global players have increasingly relied on growth in China, India and other emerging economies to offset weak sales in their home countries.