The wait is finally over — world’s third largest automaker Ford Motor Company on Tuesday announced its plans to launch a small car within two years while building a new engine plant with an investment of $500 million.

The investment will fund several new initiatives, including the expansion of Ford India’s current manufacturing facility in Chennai and construction of a fully integrated and flexible engine manufacturing plant that will go online by 2010. “The engine plant will be completed in two phases spread over three years. The first phase will be completed by April this year, when we have a capacity of 50,000 units,” said Ford India president and MD Arvind Mathew. “These engines will be used to locally produce the existing Fiesta and Fusion models.”

Ford is also ramping up capacity at its Chennai plant to 200,000 units from the exisiting 100,000 units by 2010, bulk of which will comprise its small car. While an integrated engine plant will supply for all these cars, the balance 50,000 units will be exported.

“Exports is not our criteria and if some of the engines are exported, it will be only after the domestic needs are met,” Mathew said. The new investment increases Ford’s total financial commitment to India to more than $875 million. In 2007, Ford announced a $500-million investment to build small cars in Thailand, just weeks after launching production of small cars at a new $510 million facility in China.