SANAND, India (Reuters) - Ford Motor Co (F.N) plans to triple exports from India with a $1 billion plant that will be one of its most heavily automated in Asia, offsetting slower sales inside the country with a push to sell more local production abroad.
The factory, opened on Thursday in the western state of Gujarat, will nearly double Ford’s production capacity in India to 610,000 engines and 440,000 vehicles a year. It will make engines and compact cars such as the EcoSport, a small SUV, and the Figo Aspire sedan.
“India is very cost competitive, which is important particularly for small vehicles,” Ford Chief Executive Mark Fields told reporters at the factory opening in Sanand, outside Gujarat’s biggest city, Ahmedabad.
He declined to say how quickly Ford would take exports to three times the current level.
Smaller cars are key to Ford’s efforts to compete in Asia and particularly in India, where a growing urban population means compact models account for about one in every two passenger cars and utility vehicles sold.
Ford, like foreign rivals General Motors (GM.N) and Volkswagen (VOWG_p.DE), has struggled to ramp up sales in India, amid a sluggish recovery in the domestic market and tough competition from established Japanese automakers such as Maruti Suzuki (MRTI.NS) and Honda Motor Co (7267.T).
Maruti Suzuki dominates the small car segment in particular.
Ford sold 77,140 vehicles in India in 2014 down from 80,431 in 2013, while exports nearly doubled to 76,981 units over the same period. In comparison, market leader Maruti sold 81,564 passenger cars in December alone.
But the market, already the world’s sixth largest, is tipped to grow rapidly. While sales rose just over 2 percent last year, industry experts expect that to accelerate to 6 to 8 percent in the fiscal year beginning April 1..
Ford expects Indian auto sales to more than double by 2020.
Fields said Ford would introduce three new cars in India over the next 12-18 months. He did not give more details.
India’s government under Prime Minister Narendra Modi has sought to encourage manufacturing in a drive to boost jobs in a country where a million people join the workforce every month.
The Ford plant, spread over 460 acres, will have an initial installed annual capacity of 240,000 vehicles and 270,000 engines.
“India is going to be attractive (as an export hub) because of the low cost base, and also the expectation that when the dollar strengthens it will be favorable for exporters,” said Abdul Majeed, partner and auto expert at PriceWaterhouse India.
But Ford’s “make in India” drive comes with heavy automation, as it tries to hedge against a steep rise in labor costs that has hampered firms elsewhere in Asia. Ford employs 2,500 people in the Gujarat plant, twice the number in a similar sized plant in Chennai, in southern India.
“Over time in these emerging markets labor costs will go up,” said David Scoch, president of Ford’s Asia Pacific operations. “We have seen that in China.”
Additional reporting by Aman Shah; Editing by Clara Ferreira Marques, Miral Fahmy and Mark Potter