While the two largest car makers in India -- Maruti [Get Quote] Suzuki and Hyundai Motor India --are targeting the European market for their current line up of small cars (Alto, Zen and Santro) and those in the pipeline (like Suzuki's A-Star and Hyundai's i20), American car maker Ford India plans to restrict the target market for its proposed small car to the Asia-Pacific and African region.

Ford India is at present developing a small car at its plant in Maramalainagar, 45 km from Chennai, which is expected to be rolled out by early 2010.

Speaking to Business Standard, Michael Boneham, president, Ford India, said the small car would be engineered for Indian conditions and that the company was keeping options open for both petrol and diesel variants.

Exports will start by early 2010 and focus markets would be countries in Asia-Pacific and Africa, where the demand is high for small cars. "Europe and US markets will not be included at this point," said Boneham.

Ford's small car will mark its entry into the mainstream segment -- A2 -- or more popularly known as the B segment cars in India, which accounts for a little over 70 per cent of the 1.3 million India car market. The new model will help Ford compete with Maruti Suzuki and Hyundai Motor, which are currently the market leaders in the small car segment.

Though the addressable market for Ford India would increase manifold with the new small car, it is not expected to be an entry level car for the Indian market. Today, Maruti Suzuki alone operates in this segment with its M800, which will soon be joined by Tata Motors' [Get Quote] Nano, expected to be launched next month. Ford in India operates in a very narrow range focusing mostly on sedans with its popular model Ford Fiesta. Since commencing operations in India in 1994, Ford has remained focused on sedans and SUVs and the closest it has offered to a compact car was its premium hatchback, Ford Fusion, that competes with Maruti Suzuki's Swift and Hyundai's Getz.

Speaking about the investment, he said the company had invested $500 million for the small car plan and for manufacturing engines at its current facility at Maramalainagar. As part of the investment, Ford will augment capacity at its plant near Chennai to 250,000 engines and 200,000 cars over two years, up from the existing 100,000 cars.

He added the current facility near Chennai is equipped with manufacturing eco-friendly vehicles that use alternative fuels or hybrid cars into the Indian market, saying "'it is sensible for us to look at all options" in the face of rising oil prices.

Ford is also planning to set up a park for suppliers, close to its current manufacturing unit. This would help bring down transportation, inventory and infrastructure costs for the new small cars, said Boneham.