Ford (NYS: F) is speeding up its growth plans in the emerging markets. Last week, the automaker laid the foundation of a $1 billion plant in India with an annual manufacturing capacity of 240,000 cars and 270,000 engines. Ford is all set to take competitors head-on.
The plant is a big step toward gaining a deeper foothold in the fast-growing Indian car market. What I like most about this investment is its location: Sanand. It's the same place from where Tata Motors (NYS: TTM) rolls out its cheapest car, the Nano. Ford can take advantage of the cheap labor and lower transportation costs as it tries to source a majority of the parts from nearby areas.
In 2011 Ford India sold 15% more vehicles in the country and trebled exports compared to 2010. Once the plant starts operations in 2014, Ford should be able to step up its sales. This bodes well for the company in the face of competition, as it isn't the only one eyeing a bigger market share. General Motors (NYS: GM) is trying to hit the right note in India by intensifying focus on small cars, something the nation loves. General Motors is also aggressively expanding its sales and services network in the country. Tata Motors, which is one of the leading players in the country, sells in a month nearly a third of what Ford sells per year in India!
In top gear
Ford has stomped on the gas, having already invested nearly $2 billion in the country, and the amount is likely to touch new heights once the Sanand facility is functional. Its small car, the Figo, clocked double-digit sales growth last year and got shipped to more countries than ever before. In fact, Ford's Chennai facility is coming up as a small-car hub.
The Indian market has immense potential: It currently holds the sixth position in the list of the world's largest car markets and, according to a McKinsey report, could climb up to third place by the end of the decade. The Society of Indian Automobile Manufacturers has predicted a double-digit increase in passenger car sales in India this year. So Ford's growth plans, such as eight new cars for India by 2015, make a lot of sense.
The Foolish bottom line
Ford is zooming into key markets across the globe, and India is undoubtedly one of them. I'll keep a tab on how things at the new plant progress and what Ford does to climb up the ladder in the emerging economy.
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At the time thisarticle was published Neha Chamaria does not own shares of any of the companies mentioned in this article.The Motley Fool owns shares of Ford Motor. Motley Fool newsletter services have recommended buying shares of General Motors and Ford Motor. Motley Fool newsletter services have recommended creating a synthetic long position in Ford Motor. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.
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