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CHENNAI, India (Reuters) - Ford Motor Co (F.N) began shipping its locally-made EcoSport compact SUV on Monday, hoping to share in growing demand in India for mini-sport utility vehicles, which are popular due to heavy traffic, scarce parking and bumpy roads.
The U.S. auto maker, which has struggled to build share in an Indian market dominated by small cars, will also export the EcoSport from its plant in the south Indian city of Chennai to Europe starting late this year, part of its big bet on small "urban" sport-utility vehicles.
"Who would have ever thought that a small SUV on a (compact vehicle) platform would be one of the fastest growing segments in India ... also around the world," Ford CEO Alan Mulally told reporters on Monday in Chennai, where the company spent $142 million to set up its EcoSport production line.
Sales of utility vehicles, including Renault's (RENA.PA) popular low-cost Duster compact SUV, have been robust in an otherwise dismal year for the Indian auto industry, where passenger car sales fell for the seventh straight month in May.
Mini-SUVs are especially popular in emerging markets.
In China, IHS Automotive forecasts demand for small SUVs to more than double this year to over 207,000. In India, it expects sales in the segment to grow from just 6,140 vehicles in 2012 to more than 126,000 in 2015.
A growing array of models is fuelling demand for small SUVs in emerging markets, said IHS Automotive analyst Anil Sharma. "Even two years ago, we didn't have these kinds of vehicles."
Ford makes the EcoSport in Brazil, China and now India. The Dearborn, Michigan-based auto maker is also expected to start producing the EcoSport soon in Thailand and Russia.
U.S. carmakers have struggled to gain ground in India against small car-focused brands such as Maruti Suzuki (MRTI.NS) and Hyundai Motor Co (005380.KS), which sell India-specific models. Ford's India sales fell 17 percent last year, compared with a 20 percent decline at rival General Motors (GM.N).
Ford's focus on small SUVs reflects a shift in consumer preferences globally towards SUVs for everyday driving.
A decade ago that shift boosted demand for larger SUVs, with massive utilities like the Hummer proving popular before rising oil prices and the U.S. economic downturn squeezed sales. Demand is now shifting towards smaller, cheaper, more fuel-efficient SUVs and especially in emerging markets.
According to IHS Automotive, global small utility vehicle sales grew 154 percent between 2005 and 2012. During the same period, demand for midsize SUVs grew 56 percent while sales of large SUVs shrank 22 percent.
"The story of the death of the utilities was premature," Ford Executive Vice President Jim Farley told reporters late last month.
Additional reporting by Norihiko Shirouzu in Beijing; Editing by Tony Munroe and Jane Merriman