Ford Motor Co. will double production in India with a $500-million US investment and begin making an inexpensive car, the U.S. automaker said Tuesday, attempting to boost market share in a booming economy.

As rising middle-class incomes drive demand for cars in India, automakers are rushing with plans to make inexpensive compact hatchbacks that dominate the Indian roads.

The Indian market is dominated by Japan's Suzuki Motor Corp., South Korea's Hyundai Motor Co. and homegrown Tata Motors Ltd., all of which have strong offerings in the small car segment. Tata plans to unveil a $2,500 US car on Thursday.

A significant part of Ford's investment will go into developing new products, including a new small car, within two years and an engine manufacturing facility by 2010, the company said in a statement.

Chennai plant to double production to 200,000 cars

Ford plans to double capacity at its existing plant near the southern Indian city of Chennai to 200,000 cars over the next three years to accommodate production of the small car, the statement said.

"This new investment highlights the significance of India's role in our continued expansion and overall strategy for the Asia Pacific and Africa region," John Parker, executive vice-president for Asia Pacific and Africa, said in the statement.

As part of its expansion, the company will be hiring 1,500 people, it said.

The announcement came on the eve of an auto show in New Delhi, where automobile manufacturers from around the world will showcase their products and explore strategies to expand in India.

Companies like Ford have not had much success in India because they mostly tried to sell sedans. Ford sales in India dipped slightly in 2007 to around 40,000 units from 42,060 in 2006.

General Motors began selling a small car in April, which was well received and helped the company's sales rise nearly 60 per cent through 2007. Ford said its new investment plans will help revive sales in India.

"We've developed a long-term and strategic plan for India, that's anchored on a substantial product program and new engine manufacturing facility," Parker said.

Ford aims to start manufacturing 50,000 engines within two years and then scale up production in phases to 250,000 engines, the company said.