Ford Motor Co.'s Indian unit is likely to locally manufacture a 1.0-liter gasoline engine for its soon-to-be-launched EcoSport sport-utility vehicle, a move which will help the company reduce tax on the vehicle and keep its price competitive.
"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 southern Indian port city of Chennai.
Locally manufactured vehicles fitted with imported engines attract a 30% import tax. Manufacturing 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 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 RNO.FR -2.42% rose about 10 times to 6,723 vehicles 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-liter gasoline and diesel engines as well as the 1.0-liter engine. It already manufactures 1.5-liter diesel and gasoline engines in India.
It currently sells the vehicle in Brazil and will shortly start selling it in China.
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