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Why Ford Will Import Its Smallest SUV From India

By John Rosevear – Nov 15, 2016 at 11:05AM

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In a first, Ford said that its revamped small EcoSport SUV will be built at a high-tech factory in India for the U.S. market.

Ford Motor Company (F 1.09%) is giving one of its best-selling SUVs an overhaul -- just in time to introduce it to the United States.  

The 2018 Ford EcoSport, unveiled in Los Angeles on Monday night, is an updated and face-lifted version of the small SUV that the Blue Oval has sold in other world markets for years. 

The revamped EcoSport will arrive at U.S. dealers in early 2018. And in a twist, it's coming to the U.S. from a surprising source: India.

The 2018 Ford EcoSport will sport a revamped exterior and interior, just in time for the small crossover's arrival in the United States in early 2018. Image source: Ford Motor Company.

The little EcoSport is finally headed for the United States

The EcoSport is a small "crossover" SUV, about nine inches shorter than the compact Escape. Originally developed for emerging markets, the EcoSport has evolved into a global best-seller: Ford sold over 250,000 EcoSports in 2015, in 140 different countries.

Ford gave the EcoSport a revamp for its U.S. debut. Its quirky styling has been smoothed and refined, giving the EcoSport a strong family resemblance to its bigger Escape and Explorer siblings. The interior has been updated and taken a bit further upscale, and the suspension has been revamped to give a smoother ride.

The 2018 Ford EcoSport's interior is getting a high-tech upgrade. Image source: Ford Motor Company.

It will be offered in the U.S. in four trim levels, and with a choice of two powertrains: Ford's well-regarded 1.0 liter three-cylinder EcoBoost turbo engine will be standard with front-wheel drive, and its 2.0 liter four-cylinder will be optional with all-wheel drive. Pricing, power levels, and fuel-economy figures will be announced closer to the EcoSport's U.S. launch date, Ford said. 

The EcoSport is the first of four new SUVs or crossovers expected to join Ford's U.S. lineup over the next few years. 

Why Ford will import EcoSports from India

Yes, the EcoSport will come to the U.S. from India -- from Ford's plant in Chennai, to be specific. There's a good business reason why: Back in 2011, Ford made a big investment in India, beginning construction of two manufacturing sites that are now open and have a combined capacity of 440,000 vehicles a year. But they haven't been working at close to that capacity, because the Indian new-car market hasn't grown as quickly as Ford expected.

In profile, the 2018 EcoSport is clearly a Ford. Image source: Ford Motor Company.

In a change in strategy, Ford said in 2013 that it would use India as an export hub, a low-cost manufacturing base that would supply vehicles to other Asian markets. That hasn't been enough, and Ford CEO Mark Fields said in September that the Blue Oval was "re-evaluating" its strategy and business model for India.

It appears that the new strategy involves building EcoSports in India for the U.S. market, something that should quickly add 60,000 units or more to the Chennai factory's annual production. I doubt that most buyers will notice, or care: Ford's India plants are modern, high-tech factories that build vehicles to global quality standards. 

And in any event, U.S. demand for the EcoSport is likely to be brisk, no matter where it's built. 

The 2018 EcoSport will join a fast-growing market segment

The EcoSport will join a booming U.S. market for small crossovers. The overall U.S. market for "light vehicles" (cars, pickups, and SUVs) has been roughly flat in 2016, but sales of subcompact crossovers as a group are up 32% through October, according to data from Automotive News. 

Some have done much better than that. 

Data sources: The automakers. Year-to-date sales are through Oct. 31, 2016.

The EcoSport won't have the Jeep Renegade's off-road cred, but that's unlikely to hurt its prospects. Ford is a big, established player in the SUV market, and the revamped EcoSport looks the part: Buyers will give it serious consideration.

I expect that when we revisit this chart in 2019, the EcoSport will be among the top sellers.

John Rosevear owns shares of Ford. The Motley Fool owns shares of and recommends Ford. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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