Ford plans to spend $500m expanding its India operations in Chennai to begin production of a new small car within the next two years, and construct a fully integrated and flexible engine manufacturing plant that will go online by 2010.

The new investment increases the automaker's total financial commitment in India to more than $875m. It plans to make the country one of its strategic production hubs for small cars in the Asia Pacific and Africa region.

In 2007, Ford announced a $500m investment to build small cars in Thailand, just weeks after launching production of small cars at a new $510m plant in Nanjing, China.

"This new investment highlights the significance of India's role in our continued expansion and overall strategy for the Asia Pacific and Africa region," said region head John Parker. "We've developed a long-term and strategic plan for India that's anchored on a substantial product programme and new engine manufacturing facility."

The investment plan for India has already started, and will be implemented in phases over the next three years. The first phase currently under way includes the addition of a diesel engine assembly plant at the Chennai site that will have an initial annual capacity of 50,000 units. The first engines are scheduled to roll off the line in April, and will be used in local production of the Fiesta and Fusion to satisfy domestic demand.

A significant part of the investment will be used to develop new products, primarily to expand the Chennai plant and accommodate volume production of the new small car. Production of the small car is scheduled to commence within the next two years, increasing annual production at the expanded plant to 200,000 units by 2010.

"Ford India's small car will be a worthy addition to the already successful and robust product mix that we offer to Indian consumers, and will further strengthen our competitive position in this increasingly dynamic market," said Arvind Mathew, president and managing director of Ford India.

The second major component of the investment plan is a new, fully-integrated engine manufacturing facility to be constructed adjacent to the current vehicle plant. This new flexible facility will be capable of manufacturing both petrol engines and Ford's next generation diesel engine. Initial annual production capacity is planned for 250,000 units, with the first engines coming off line by 2010. Production at the diesel assembly plant that's currently being set up will be integrated into the new facility.

"Our investment plan clearly signals Ford's intent to implement an aggressive and comprehensive growth strategy for the India market. Reaching volume production of vehicles and engines will not only allow us to participate in the future growth of India's auto industry, but really to help drive it, both in terms of domestic sale and export potential," said Mathew.

The new facilities and capacity expansion will create more than 9,000 jobs - 1,500 direct and 7,500 indirect - as Ford India considerably increases its supplier base to meet the expanded production volumes. This, in turn, will warrant additional investment by its suppliers and vendors and contribute to the overall growth of India's auto industry.

"We'll be significantly increasing our local sourcing to meet the requirements of our expanded production. One of the factors in deciding this investment was Ford's confidence in the international standards and capabilities of India's supply base," said Mathew.

"We're also committed to the ongoing development of our own human resources, and we'll be providing skills training for the additional work force."

Ford India added 20 dealers to its network in 2007, bringing the total to 130 locations throughout the country. The company plans to further expand its dealer network to accommodate the planned rise in domestic sales.