Ford Motor Company plans to invest a billion dollars in the northwestern Indian state of Gujarat in a bid to increase its production capacity to 250,000 cars a year, according to the New York Times.

India, where passenger car sales grew 29 percent in the last fiscal year, to 2.5 million, is expected to become a critical market over the next decade, Ford executives said Wednesday. Ford expects a “dramatic spike up in India” by the middle of the decade as incomes increase, said Joe Hinrichs, president of Ford Asia Pacific and Africa, during a meeting with reporters in Delhi, the Times said.

American automakers — who have lagged behind Japanese and Korean competitors in India — seem finally to have gotten the formula right with recent launches of small hatchbacks, equipped with diesel engines to woo India's cost-conscious consumers. 

But Ford's big investment is coming as the country's fast-growing automobile market appears to be slowing down as the result of higher interest rates, inflation and high fuel costs.