Ford Motor recently opened a $1 billion factory in Gujarat, India, aimed at tripling its exports from this country as it continues to suffer from declining sales. This plant, which spans more than 460 acres, has been very heavily automated as the automaker seeks to increase local production to be sold overseas.
With this plant, Ford will be able to almost double its annual production capability in India to 440,000 vehicles and 610,000 engines. Among the products of this factory are compact cars like the EcoSport and the Figo Aspire. At the plant opening, Ford CEO Mark Fields talked about how India is highly “cost competitive” – which is especially significant for small vehicles.
He didn’t say when Ford will be able to bring its exports to triple the present rates. For Ford to be competitive in Asia, specifically in India, it has to focus on compact cars. In India, small models make up 1 of every 2 units sold of passenger cars and utility vehicles.
This is largely because of a rising urban market. It has been difficult for Ford, GM, and VW to raise sales in India because of a low recovery in its local market and increasing competition from the more established Japanese brands like Honda and Maruti Suzuki.
Notably, Maruti Suzuki is at the top of the small car segment. Ford’s sales in India fell from 80,431 in 2013 to 77,140 vehicles in 2014. For the same period, exports almost doubled to 76,981.
To put things in perspective, Maruti posted sales in December of 81,564 passenger cars. India’s auto market is the sixth biggest in the world but it is expected to widen rapidly. Experts say that sales will grow by 6-8% in the fiscal year starting April 1.
Ford forecasts that by 2020, its sales in India will double. Ford hasn’t provided more details but has so far confirmed that it will present India with three new vehicles within the next 12 to 18 months. According to India's Prime Minister Narendra Modi, the government seeks to boost manufacturing so that it can push jobs in a country that has to employ up to a million each month.
This Ford plant has an initial installed annual capacity of 240,000 vehicles and 270,000 engines. Abdul Majeed, partner and auto expert at PriceWaterhouse India, said that India is ideal as an export hub due to its “low cost base” and since exporters will benefit when the dollar is strengthened.
Ford hopes to protect itself from a sharp increase in labor costs that has hurt other companies in Asia. Ford’s Gujarat plant has 2,500 workers, double the number in a plant with a comparable size in Chennai, located in the south of India.