Ford to invest $1bn in Gujarat plant

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Ford to invest $1bn in Gujarat plant

Post  Administrator on Thu Jul 28, 2011 7:24 am

Ford will announce plans today to invest $1bn to build a factory in western India in a drive to gain a greater share of one of the fastest-growing car markets.

The factory in Gujarat, which should be in production by 2014 employing 5,000 people, is expected to have an initial annual capacity of 240,000 vehicles, said Joe Hinrichs, head of Asia-Pacific and Africa. This is more than double the capacity of the US carmaker’s facility in the southern state of Tamil Nadu.

The Gujarat plant, close to the factory where Tata, the Indian conglomerate, builds the Nano, the world’s cheapest car, will be built on a 430-acre site and include a plant producing up to 270,000 engines.

Ford’s largest single investment in India follows the success of its India-built Figo model, which helped the group nearly triple its sales last year. The Detroit carmaker plans to introduce eight models in the market by mid-decade.

Mr Hinrichs said: “When you look at the combination of the Figo’s success last year … with all the product investments we have coming into the industry … and with the new [$1bn] investment going into Gujarat you can see Ford’s commitment to our growth here in India. [This is] really a bet on our future here in India but also a bet on the auto industry’s future in India.”

Ford estimates the Asia-Pacific region will account for 45 per cent of global light vehicle sales in 2020, up from 42 per cent last year and 21 per cent at the start of the decade.

Deepesh Rathore, managing director for India at IHS Automotive, said: “Most of Ford’s two decades in India were pretty uneventful. However, over the past five years the group has stepped up its game and the success of the Figo has given them confidence to try to move in to the mainstream market … this is the right time to expand.”

India’s car sector has been growing at record levels over the past three years and in spite of a recent slowdown is expected to keep on growing between 10-15 per cent in the next five years.

Ford, which has increased sales among India’s urban middle class, aims to boost sales in emerging second- and third-tier cities, such as Amritsar and Srinagar in the north.

The $1bn investment will be one of the biggest made by a big US company in Gujarat, which was chosen for its pro-business reputation and investment in infrastructure. It has been one of the most successful Indian states in attracting foreign investment, partly attributed to its efforts against corruption.

However, the choice is likely to be politically sensitive as Narendra Modi, Gujarat’s Hindu nationalist chief minister and main architect of the state’s economic revival since 2001, has been criticised for his lax role during the 2002 communal riots when at least 2,000 people, mainly Muslims, were killed.

Mr Hinrichs declined to comment on Mr Modi’s political reputation. He said Gujarat was selected over other states for its geographical location and ports from which to export cars to other emerging markets. Ford ships the Figo from India to 50 other countries, including South Africa, Mexico and the United Arab Emirates.

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