Ford confirmed last week its intention to build its small "global car"– the Ford Fiesta – in a factory near Mexico City, as part of a $3 billion manufacturing investment there.

The announcement was a coup for the Mexican economy after years of losing manufacturing jobs to China and other Asian countries, and came despite strong efforts by the United Autoworkers Union (UAW) to have Ford build the factory in the US.

The Fiesta is being positioned as a “global car” that will be capable of being sold anywhere in the world. It will start building the car in a Mexican plant that is currently making pick-up trucks.

It is not clear whether Ford will make even more scaled back versions of the already low-priced Fiesta to compete with the series of ultra-low priced cars coming to market. The company has been selling the Fiesta in Mexico and Asia well in recent years, even though the model was dropped from the US market in the late 1970s.

Last year, India’s Tata Motors announced it would build a car that would sell for $2500 and be marketed in India and other developing markets. More recently, auto companies Bajaj, Renault and Nissan announced a partnership with plans to build similarly low-priced vehicles.

"We consider Mexico to be a key area for our business in the short and long term," Ford CEO Alan Mulally said in a speech.