By Dow Jones Business News, March 15, 2013, 12:10:00 PM EDT
By Anirban Chowdhury
MUMBAI--Ford Motor Co. ( F ) is likely to locally manufacture a 1.0-liter gasoline engine for its soon-to-be-launched
EcoSport sport-utility vehicle, a move that will help the company reduce tax on the vehicle and keep its price
"We will initially import the engines [from Europe], but will in future manufacture them locally," Sriram Padmanabhan,
vice president for marketing at Ford's India unit, said Friday.
Ford plans to manufacture EcoSport at its plant in the south Indian port city of Chennai.
Locally manufactured vehicles fitted with imported engines attract a 30% import tax. Manufacturing the engines locally
will make the SUV cheaper for India's price-sensitive customers.
Ford has to keep the price of the SUV's gasoline variants low as demand for vehicles powered by gasoline has fallen in
India. Gasoline is far costlier than diesel, which is subsidized by the Indian government.
Overall too, automobile demand in India has been hit by increasing fuel prices and high borrowing costs.
Ford expects the compact SUV will help the company turnaround its falling sales in India--its sales fell 30% to 7,253
vehicles in February.
Sales of compact SUVs, especially with diesel engines, are still strong. For instance, sales of the local unit of
Renault SA rose about 10 times to 6,723 in the past month, helped by strong demand for its Duster SUV. The Duster, which
was launched in last July, accounted for 5,590 units of the company's total sales in February.
Ford will likely introduce the EcoSport in India in June with 1.5-gasoline and diesel engines as well as the 1.0-liter
engine. Both 1.5-litre engines will be locally manufactured.
It already sells the vehicle in Brazil and will shortly start selling it in China.
--R. Jai Krishna in New Delhi contributed to this article.
Write to Anirban Chowdhury at firstname.lastname@example.org
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