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Ford Plans $500M Investment in India Operations; Small Cars and Diesel Engines

Ford Motor Company plans to invest US$500 million to expand its India operations, reaffirming its commitment to developing and implementing an aggressive growth strategy in the country. The new investment will fund several new initiatives, including the expansion of Ford India’s current manufacturing facility in Chennai to begin production of a new small car within the next two years, and construction of a fully integrated and flexible engine manufacturing plant that will go online by 2010.

The new investment increases Ford’s total financial commitment in India to more than US$875 million, and underscores its plan to elevate India as one of the strategic production hubs for small cars in the Asia Pacific and Africa region.

In 2007, Ford announced a $500 million investment to build small cars in Thailand, just weeks after launching production of small cars at a new $510 million, state-of-the-art facility in Nanjing, China.

The overall investment plan for India has already commenced, and will be implemented in phases over the next three years. The first phase currently underway includes the addition of a diesel engine assembly plant at the Chennai site that will have an initial annual capacity of 50,000 units. The first engines are scheduled to roll off the line in April, and will be used in the local production of the Fiesta and Fusion to satisfy domestic demand.

A significant part of the investment will be utilized for the development of new product programs, primarily to expand the Chennai plant and accommodate volume production of the new small car. Production of the small car is scheduled to commence within the next two years, increasing overall annual production at the expanded plant to 200,000 units by 2010.

The second major component of the investment plan is a new, state-of-the-art and fully-integrated engine manufacturing facility to be constructed adjacent to the current vehicle plant. This new flexible facility will be capable of manufacturing both petrol engines and Ford’s next generation diesel engine. Initial annual production capacity is planned for 250,000 units, with the first engines coming off line by 2010. Production at the diesel assembly plant that’s currently being set up will be integrated into the new facility.

Comments

Harvey D

A wise move to ensure Ford's future and to produce smaller lower consumption vehicles at a lower cost.

Will Ford try to compete with Tata's proposed $2500 car or try to sell Indians larger F-150?

India could produce future PHEVs, BEVs, batteries, other components and subassemblies competitively with China.

macroshaft

What is it with FORD - is it against their religion to make nice, quiet & cheap electric cars???

Feliks

with new engine?

Rafael Seidl

@ Macroshaft -

there is simply no such thing as a cheap electric car with adequate safety and performance. Most Indians struggle to afford any vehicle costing much more than Rs 1 Lakh (~$2500), never mind something with a five-digit sticker price. Besides, the country's electricity grid is struggling to keep up with growing demand - large number of electric vehicles would create an infrastructure problem.

Ford is setting up an assembly plant in India for the same reason everyone else is: imports of fully built cars carry a punitive tariff of 100%, whereas imported parts are penalized at a 40% rate. The Japanense and European supply chains are already producing in India to eliminate even that overhead.

In India, diesel costs almost a third less than gasoline. Among other reasons, this is because finished gasoline is exported to Iran where diesel is banned and refinery capacity cannot be expanded due to US sanctions. Fuel prices in both countries are still regulated by government fiat and politicians are very wary of angering voters by raising them. The net result is that on-road fuel are in effect subsidized, undercutting efforts at conservation. India has very little natural gas of its own and the biogas produced in backyard anerobic digesters is typically used for cooking and heating. CNG/ANG vehicles are very rare in India.

India country roughly tracks European emissions laws and is currently on something similar to Euro 3 for new four-wheeled vehicles. That's nowhere near the extremely strict T2B5/LEV II emissions levels in force in the US, but it was good enough in Europe until 2005. Therefore, it should surprise no-one that Ford is focusing on low-cost diesel vehicles for the Indian market.

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