It is the small car market in India that is now attracting all the major auto players. The latest to join the fray to try and capture the small car segment is Ford India.

Ford is expected to start production in two years, said Arvind Mathew, president and managing director, Ford India. The details of the small car, however, are yet to be finalised.

This new initiative is a part of Ford Motor Company's new plans to invest an additional $500 million in India to expand its India operations. That takes Ford's total investment in India to more than $875 million.

This will elevate India as one of the strategic productive hubs for small cars in the company's Asia Pacific and Africa region.

In 2007, Ford Motor Company had made similar investment ($510 million) in Nanjing in China to build small cars. Soon after that, another investment of US $500 million was invested in Thailand, again to make small cars. Now, in January 2008, India also joins the league making India, China and Thailand as their three significant markets.

The $500 million investment is aimed mainly at two major initiatives. One, of course is the production of small cars. The second is to construct a fully integrated and flexible engine manufacturing plant that will go online by 2010.

This new flexible facility will manufacture both petrol and diesel engines, and also Ford's next generation diesel engine. This will be Ford's only diesel engine manufacturing plant outside Europe.

Initial annual production capacity is planned for 250,000 units with the first engines coming out by 2010.

Mathew said that the overall investment plan for India has already commenced, and will be implemented in phases over the next three years.

The first phase that is currently underway includes the addition of a diesel engine assembly plant at the Chennai site. The initial capacity of the plant will be for 50,000 units.

The first engines are scheduled to come out in April, and will be used in the local production of the Fiesta and Fusion, which is mainly for the domestic market.

While the small car is aimed at the Indian customers, the engines manufactured in Chennai will be exported to the Asia Pacific region.