Small enough to draw a crowd

Ford is manufacturing the Figo in India and plans to export it to other Asian countries. Photo / Supplied

Ford has unveiled a made-in-India compact car and flagged expanded production in China as it seeks to boost sales in Asia, a region the United States automaker has hardly dented but is counting on to drive growth.

The four-door Figo, which is Italian slang for cool, will go on sale in India during the first quarter of next year. There are also plans to export the low-cost car to other Asian countries.

Ford declined to reveal the Figo's sale price and initial production volumes. One analyst said he expects the Figo to sell for $8500 to $11,000, putting it in competition with several other compact models, including the high-end Tata Nano.

Ashwin Patil, an analyst at HDFC Securities in Mumbai, said that there's never been much demand in the US for small cars. "It was always for the sedans and the premium cars," he said. "In India it's the other way around.

"This step Ford has taken to launch a small car in India is an eye-opener for US auto companies. They'll be able to gain a good chunk of the pie."

The Figo represents a change of gear for American car manufacturers, which have been slow to penetrate India's small but fast-growing car market but are now increasingly chasing growth in Asia.

"This new car will be a game changer," said Michael Boneham, president of Ford India. "It will give us muscle in the heart of the Indian market."

Ford chief executive Alan Mulally said he expected a third of global car sales to come from Asia in 20 years, a third from the Americas and a third from Europe and Russia.

The company has a lot of catching up to do in Asia. Ford, the only major US automaker to survive the financial crisis without a taxpayer bailout, has about 15 per cent market share in North America, 10 per cent in Europe and just 2 per cent in Asia.

Executives said they would be making an announcement about increasing Ford's China production capacity, currently at 450,000 vehicles a year. They wouldn't confirm reports the company will open a third factory in China.

The Figo is the first fruit of a $700 million India investment Ford announced last year. That money will also be used to double production at its factory in the southern city of Chennai to 200,000 vehicles a year, and raise engine production to 250,000 a year. The expansion is part of Ford's effort to transform India into a small car production and export hub - a strategy that has done well for Hyundai, India's largest car exporter.

In India, US car companies have proven less nimble than their Japanese, Korean and Indian competitors in offering cars that are small and cheap enough to attract the mass of the buying public.

Three-quarters of all cars sold in India are compacts. Though Ford has been doing business in India since 1995, the Figo is its first compact offering to target the mass market. "It will position them in a growing market in a segment that's got volume," said Dilip Chenoy, director general of the Society of Indian Automobile Manufacturers, an industry group.

India's auto industry was quick to emerge from the global downturn. Sales began to recover in February and so far this fiscal year, from April through August, car sales have risen 13.5 per cent over last year.

Maruti Suzuki, hand-picked by the government in the early 1980s to manufacture cars in India, still dominates the industry. It has sold 334,897 cars so far this fiscal year, 47 per cent of the total.

Together, India's top three car companies by domestic sales, Maruti Suzuki, Hyundai, and Tata Motors, have accounted for 77 per cent of car sales this fiscal year.

Ford sold just 10,768 cars in the same period, behind rival General Motors, which sold 25,050 cars.

Mulally said Ford had to integrate and scale up its global operations before it could generate the sales volumes that would make production of a low-cost compact like the Figo profitable.

"This is our chance where we can bring features and capacities to a small car and offer it at a competitive price and still make money," he said.

The Indian market has also matured, with a growing number of customers ditching their motorbikes for cars with some of the features and performance American and European consumers take for granted.

In designing the Figo, Ford did extensive market research, nicknaming its archetypal consumer "Sandeep".

Sandeep is 27 years old, recently married, makes $8000 to $11,000 a year and still lives with either his or his wife's parents.

- AP