A Half Billion Dollar RSVP; Ford Ups Its Investment in India
January 09, 2008

By Nick Kurczewski

NEW DELHI, India -- If you can’t attend the party, then there’s nothing like sending along a half-billion dollar RSVP to ease your host’s disappointment.

Despite being a notable no-show at this year’s New Delhi Auto Expo, Ford announced Tuesday plans to expand its manufacturing capabilities in Chennai, India, to the tune of a $500-million investment. Ford will double its car production to 200,000 cars a year, including a new small car, and construct a new engine factory, capable of producing 250,000 motors a year; Ford now builds 50,000 engines in India.

Ford isn’t saying specifically what car will be built in India, but it likely the next-generation Fiesta, hinted at in the three-door Verve hatchback concept unveiled at the Frankfurt auto show last September.

Ford intends for the Verve’s B-car platform to be built across the globe, from China to the U.S., wearing bodies appropriate to the local market. Indeed, the Ford India car, slated for production in two years, is likely a small hatchback like the Verve concept shown in Frankfurt – a vehicle smaller than Ford India’s current offerings like the Fusion, Endeavor SUV and Ikon sedan. Another Verve concept -- a four-door notchback -- was shown in China; a sedan will be unveiled at the upcoming Detroit auto show.

For the moment, the small car market in India is dominated by domestic manufacturers, such as Tata and Maruti. Considering the breakneck expansion of India’s economy – not to mention the country’s exploding demand for cheap city-cars – Ford’s announcement is proof that the American manufacturer is not willing to see others reap the rewards of India’s car market.

Copying Ford China's Success

Arvind Mathew, managing director and president of Ford India, said in an interview that this announcement signals both Ford’s commitment to the Indian market and the decision to use the Chennai-based facility as a manufacturing hub for vehicles sold in Asia and Africa. 

Last year, Ford announced a similar $500 million investment to build small cars in Thailand. The company has also just launched production of small cars at a new $510 million facility in Nanjing, China, where Ford is moving toward production of 400,000 vehicles a year. Ford announced Tuesday that its China sales soared 30% in 2007 to 215,000 vehicles.

Ford CEO Alan Mulally told journalists in Detroit on Tuesday night that Ford’s plan for India is to copy what it has done so successfully in China and Southeast Asia.

An Indian-Built Ford for America?

Will Indian-built Fords eventually reach markets in Europe or the U.S.?  Despite what he describes as tremendous steps forward in quality by the current Chennai factory, Mathew said that this scenario is highly doubtful as high shipping costs would offset any cost savings achieved by building cars or engines in India.

Mathew said the first motors produced at the new Chennai engine plant will be “three to four years behind Europe” in terms of emissions levels.  By 2010, when production of diesel and gas-powered motors reaches 250,000 units, Mathew said emissions levels will be on par with Europe’s current Stage IV levels.

As for the new small car, Mathew is giving away few hints other than a rough estimate regarding its overall dimensions.  Some pricing overlap with other Ford India models is likely, if only because Ford India’s other models, like the Ikon sedan, are kept as barebones and cheap as possible in standard form.  In the Ikon, even a side mirror in an extra-cost option.

Based on what Ford CEO Alan Mulally told reporters in Detroit Tuesday night, a competitor to Tata’s $2,500 car, unveiled at the New Delhi auto show, isn’t forthcoming from Ford. "We're going to be very selective about which markets we participate in," Mulally said. "We'll stick to our strengths and use our size to be competitive."

Photo by Ford

Ford's Verve concept, shown last September at the Frankfurt auto show, hints at the next-generation Fiesta that could be sold in India.

Nick Kurczewski is a Paris-based correspondent for AutoObserver covering the New Delhi Auto Expo. Michelle Krebs contributed to this story.

Posted by at 6:37 AM under Featured , Ford , News | Comments (0) | digg this | Seed Newsvine