US auto giant Ford said on Thursday it would invest $1 billion to build a vehicle assembly and engine plant in India as it ramps up production to exploit the country's burgeoning car market.

The new factory in Gujarat will employ around 5,000 workers and will be Ford's second in India,Michael Boneham, Ford's president in India, told reporters in a conference call. Ford's existing manufacturing facility is located in Chennai.

The Gujarat government will allocate 400 acres toFord Motors. The facility will come up near Tata Nano's mother plant in Sanand, located 40 kms from Ahmedabad.

An additional 100 acre will be earmarked for the vendor park.

"In line with its long term commitment, Ford continues to pursue an aggressive growth strategy in India to bring world-class vehicles. As part of its plan to introduce eight new products by the middle of the decade, Ford is significantly expanding its capacities in its existing facility in Tamil Nadu as well as exploring other options to meet the growing demand of consumers in India and export markets across the world," Ford said in a written communication to ET on Wednesday.

Ford's move comes close on the heels of Maruti Suzuki expressing its interest to set up shop in Gujarat. Others in pipeline to make Gujarat their manufactuing desitnations include French carmaker PSA Peugeot Citroen, 2-wheeler manufacturer Hero Honda and Bajaj Auto.

Peugeot Citroen officials have already visited the state and are in the process to finalise the project that too would come adjoining theTata Nano plant. A formal announcement is likely in one month.Bajaj Auto is planning to set up its fourth and largest plant near the Mundra port in Gujarat.

The plant will also manufacture passenger car the company for which it has joined hands with Nissan-Renault.

Several global automakers in India such as Toyota Motor Corp, Nissan Motor Co, Volkswagen and General Motors are lining up new models and boosting investment in the country with a focus on exports.

The factory in Gujarat, expected to be up and running by 2014 is expected to have an initial annual capacity of 240,000 vehicles, the company said.

"We are aggressively expanding in markets around the world that have the most growth potential in order to offer more of the fuel-efficient, high-quality vehicles from our global portfolio that customers in markets like India want and value," Boneham said in a statement.

Boneham said the company currently has four plants under construction in China and one in Thailand, apart from the ones in India.

"These new state-of-the-art facilities will help us reach the goal of increasing worldwide sales by nearly 50 percent by mid-decade to about 8 million vehicles per year," he said.