The Ford Figo will be joined by at least eight new models as the maker presses into India.
Ford will invest nearly $1 billion in India in a bid to gain ground in what many see as a market that could potentially rival the long-term growth of China.
Most of that money – about $900 million – will go for a new plant, the company’s second, that could boost Ford’s Indian production capacity from the current 240,000 vehicles a year to 600,000. The announcement comes as Ford begins expanding its product portfolio with the Indian launch of the Fiesta, its global subcompact.
“We don’t see the fundamentals changing here in India and the rest of Asia, and that is that growth is going to be the order of the day,” said Michael Boneham, head of Ford’s Indian operations.
Earlier this year, Ford CEO Alan Mulally outlined an aggressive growth plan that calls for boosting worldwide sales to 8 million this decade, a 50% jump. The executive stressed the importance of the Asia/Pacific region in meeting that goal.
Ford was a late entrant, however, and has been playing a game of catch-up in China, currently the world’s largest national automotive market. It is also struggling to keep up with competitors in India, where the market has been growing at a rate of up to 20% a year – reaching 2 million last year – though the Society of Indian Automobile Manufacturers recently downgraded its forecast for the year to somewhere between 10 and 12%.
The potential market is huge and largely untapped. While there is roughly 1 car per person in the United States and somewhere around 600 to 700 per thousand in much of Europe, there are only 25 per thousand in India. By comparison, the emerging Brazilian market has 192 cars per thousand.
Part of the challenge is an unequal distribution of wealth, though the Indian middle class is growing rapidly. Meanwhile, the government has engaged in a major road building binge though many towns around the country are still unreachable by automobile.
Ford’s share of the Indian market is less than 5%, but the expansion plan could boost that rapidly. The maker is just finishing a project to double the size of its existing plant, to 240,000. The new factory, which will begin production in 2014, will be based in the western city of Gujarat – near where Indian giant Tata currently builds its low-priced Nano model.
The maker will invest another $72 million in a new Indian engine plant.
With the launch of the Fiesta and another model dubbed Figo, Ford plans a rapid expansion of its Indian product line-up, as well, with eight new products planned as part of the new project.
But as in China, the maker won’t have a cakewalk. Competitors are also looking at big growth, Toyota this week saying it will invest $220 million to boost its Indian production capacity to more than 200,000 by 2013. The Japanese industry giant saw its sales nearly double in June.