US car maker Ford says it is increasing production by 18% in the third quarter of this year to meet growing demand from the 'cash for clunkers' trade-in incentives from the US government.

Ford said in a statement it was increasing North American production by another 10,000 units to 495,000 units to build more fuel-efficient vehicles.

The number two US car maker said it planned to produce 570,000 vehicles in the fourth quarter, a 33% from a year earlier and 15% above planned third-quarter levels.

'The increase represents higher production across a range of cars, crossovers and trucks,' the company said.

Ford said it was working to boost production of the Escape small utility vehicle in Kansas City, Missouri, and the Focus in Wayne, Michigan, through additional production shifts and increased overtime. It said these models were 'flying off' car dealer forecourts.

The 'clunkers' plan offers owners of ageing cars and trucks incentives of up to $4,500 towards a new, more-efficient vehicle, a scheme meant to help boost the struggling car industry while helping the environment.

The programme - begun with $1 billion that was quickly snapped up by car-hungry consumers - has been extended with an additional $2 billion allocated by Congress.