US automobile giant Ford Motor Company has decided to invest another Rs 4,000 to Rs 5000 crore in an R&D centre in Chennai, after investing a billion dollar in a second plant in Sanand, Gujarat, said people familiar with the development.
This development comes 10 months after its Global CEO Mark Fields promised Prime Minister Narendra Modi that he will do his bit for the government's Make in India campaign,
In an exclusive interview with ET recently, Fields had expressed interest in increasing the product development capability in the country.
"There's a tremendous engineering talent here, and we want to tap into that and grow our product development capability here methodically over a period of time," Fields had said.
When contacted, a Ford India spokesperson said, "As for future projects and investment, we have nothing to announce." With this fresh investment, Ford India will be increasing its investment in the country by almost 50% of its cumulative investment so far.
ET has learnt that the announcement on the Chennai R&D centre is likely to be made in the second half of this year, and the agreement with the Tamil Nadu government is expected to be signed in the next few months.
People close to the company said the development of new B500 project, which will spawn a new mid-size segment sedan to take on the Honda City somewhere around 2018, will be the first project on which Indian R&D base will play an important design, development and engineering role. The B500 project may eventually also spawn out an MPV in the future.
The new Indian product development centre will be one of the largest R&D bases in the Asia-Pacific region for the maker of the iconic Mustang and Lincoln cars and it is going to be linked to the Ford's Global Product Development Ecosystem, wherein engineers in India will offer key inputs for products not only meant for India but for global markets too.
Experts said the local product development will drive localisation further and help the company reduce cost by reducing the dependency of imports.
With a huge talent pool of skilled engineering workforce, India can become an important development hub for Ford India. Its rivals such as Maruti Suzuki, Hyundai Motor India, Renault Nissan already have sizeable development hubs, not only serving the local markets, but also contributing to the global markets as well.
Post the establishment of the local R&D base, the company's Ford Technology Services India and Ford Global Business Service operation, which has over 10,000 workforce, will merge into a common organisation.
Gaurav Vangaal, senior analyst, forecasting at IHS Automotive, said it isn't a surprise, as the product development cost in India is almost half, if not one-third, when compared to some of the evolved markets.
"With pressure on profitability, achieving faster break-even on projects has become critical for MNC's, the headquarters know while setting up the R&D infrastructure in the country is a capital intensive activity, but the rewards are multi-fold in the long run. With product life cycle shortening, local R&D not only helps in coming out with new products faster that too at a lower cost led by Indian frugality and the value innovation for India can be easily shared with the global markets too," says Vangaal.
With more than $2 billion investment in India, Ford currently employs over 14,000 people across its two plants in Sanand and Chennai, and some of its Global Services Business operations in Coimbatore and Gurgaon.