Ford Plans to Spend $906 Million on Car Factory in India’s Gujarat State

Ford Motor Co. (F), the second-largest U.S. automaker, will spend 40 billion rupees ($906 million) on a second car factory in India to cut shipment time to the northern part of the country and access ports on the nation’s west coast.

The company will build the plant with an initial capacity to make 240,000 cars and 270,000 engines annually in the western state of Gujarat, Ford said in an e-mailed statement today. The factory will start production in 2014, it said. The company has a plant near Chennai in the southern state of Tamil Nadu.

Ford is following General Motors Co. (GM) and Tata Motors Ltd. in building a factory in Gujarat. The plant will allow the company to ship cars faster to the north of the country, Joe Hinrichs, president for Ford Asia Pacific and Africa, said in a conference call. Presently it takes about 10 days to transport cars from Tamil Nadu to the northern state of Punjab, he said.

“It’s a very good strategic move by Ford,” said Deepesh Rathore, the India head of IHS Automotive. “Gujarat’s location on the western coast will give Ford access to the European market as well as access to northern India.”

The plant will employ 5,000 people, Dearborn, Michigan- based Ford said. The Tamil Nadu plant has about 5,000 workers.

Ford sold 95,395 passenger cars in India in the year ended March 31, giving it a 4.8 percent market share, according to data from the Society of Indian Automobile Manufacturers.

Earlier this month, Ford introduced a new variant of its Fiesta sedan, the first of eight models the company intends to introduce in the country by 2015.

“This new factory will allow us to balance our manufacturing footprint in India,” said Hinrichs. “This plant is critically important for Ford. The ride up won’t be a straight line but we’re bullish about India.”

Tata Motors Ltd. (TTMT) last year opened a factory in Gujarat to build its Nano small car.

To contact the reporter on this story: Siddharth Philip in Mumbai at sphilip3@bloomberg.net.

To contact the editor responsible for this story: Kae Inoue at kinoue@bloomberg.net.

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