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Chennai: A combination of factors such as misreading the market / product design / positioning and huge investments in a second factory while the capacity of the first factory itself was not fully utilized, led U.S. auto major Ford Motor Company to bite the dust in India, industry experts have said.
Ford’s exit will benefit companies that are in the utility vehicle space, they added.
At a time when Asian automakers conquered the American market, it was only natural for American automakers – General Motors and now Ford – to stop in India if they got their basics wrong.
Ford India Private Ltd recently announced that it will end vehicle assembly at the Sanand plant in Gujarat by the fourth quarter of 2021 and at the vehicle and engine manufacturing unit in Chennai of here the second quarter of 2022.
“Put simply, Ford didn’t read the Indian market correctly. In the late 90s and later, small cars dominated the market. Maruti ruled the roost and Hyundai Motor came in and launched its Santro and brought it down. conquered an important market, “said an expert in the automotive industry. IANS preferring anonymity.
He also said Ford hasn’t fully customized its car platforms. India is a right-hand drive market while in the United States it is left-hand drive.
“Some car models from Ford India, the owner-driver, had to get out, walk around the vehicle, open the left side door to unlock the trunk, certainly a tedious affair,” said the expert.
“Different factors at different times played against Ford India and affected the business cumulatively. All three factors – product, price and positioning – have improved over the years. Ford is facing issues on a global scale , he needs to cut his losses, ”another industry official unwilling to be named told IANS.
For a long time, the small car segment has been the perfect place for car manufacturers in India.
Maruti Suzuki India Ltd and Hyundai Motor India Ltd took advantage of the launch of new models at different prices.
But Ford and General Motors failed to do so because they did not have a small car in their global portfolio.
“Their initial attitude towards the Indian market was like this: You ate the pizza and burger that were launched. So drive the model we offer. , said the expert.
U.S. officials at Ford were confused when the media asked about the vehicle’s mileage per liter as they focused on engine horsepower. Ford looked at the Indian market through the American prism, recalls a journalist.
Ford has been operating in India for over 20 years now. The company entered as a 50/50 joint venture partner with Mahindra & Mahindra Ltd and subsequently increased its stakes.
The first car launched was the Ford Escort, with the idea of having a product on Indian roads rather than spending time designing one for the Indian market.
Ford India later set up its factory near Chennai with the government of Tamil Nadu offering attractive tax incentives like deferral of sales tax for a few years.
The first car to come out of the Chennai factory was the Ford Ikon.
Since then, Ford India has largely been a “one-model” company, meaning that a single model will have higher sales.
Meanwhile, Asian players like Maruti Suzuki and Hyundai Motor have launched new models.
Ford India then added models like Figo, Fusion, Aspire, EcoSport, Endeavor and Freestyle.
“Although the number of vehicles sold in India has grown significantly over the years, the company has failed to gain much market share in the passenger vehicle (PV) segment. During fiscal year 2000 , Ford sold 8,000 PVs in India, which grew to 93,000 units in fiscal 2019. But market share growth was negligible, from 1.1% in fiscal 2000 at 2.8% in FY2019. Volumes sold in FY2020 and FY2021 fell further to around 66,000 and 48,000 units respectively, ”Vahishta Unwalla, Chief Analyst at industrial research team, Care Ratings Ltd. told IANS.
Even though the capacity of its Chennai plant was huge, Ford India spent around $ 1 billion to establish a plant in Sanand, Gujarat.
“Without increasing the capacity of the Chennai plant by 30%, investing in a new facility with a huge investment was a bad strategy. A company suffers losses not only because of a lack of sales, but also because of its investment decisions, ”VG Ramakrishnan, Managing Partner, Avanteum Advisors LLP, told IANS.
According to Ford India, cumulative operating losses of more than $ 2 billion over the past 10 years and an impairment of non-operating assets of $ 0.8 billion in 2019 prompted its decision to shut down its two factories.
“The investment made sense according to the company’s plans at the time. But it didn’t work out later,” a Ford India official told IANS.
According to Ramakrishnan, Ford did not have a product for the market.
“Global companies first make a product plan for a country, let’s say India’s plans. Then it’s part of the Asia-Pacific product plan, and then part of the global product plan,” Ramakrishnan said.
Looking at the Indian market globally, the figures may not have been encouraging for the development of a new product for Ford.
This was not the case for the others. For Suzuki Motor of Japan, India was a major market while Hyundai Motor made India a global hub for the production of small cars.
According to Unwalla, nearly half of the units Ford sold in India were commercial vehicles with offerings of popular models like Ecosport and Endeavor. In the multi-utility vehicle segment, Ford’s share peaked at 9.5% in fiscal 2015, but began to decline in all successive years. In fiscal year 21, this percentage fell to 3.3%.
“However, the market share in the utility vehicle segment of competitors like Maruti Suzuki India Ltd. has grown from 12.4 percent in fiscal 2015 to 21.6 percent in fiscal 2021. From Plus, Hyundai Motor India Ltd’s market share increased from 0.3 percent in fiscal 2015 to 20.2 percent in fiscal 2021. Therefore, this shows that Ford does not ‘failed to gain or maintain its market share,’ added Unwalla.
Ford India is not a major player in any automotive segment, its absence will not result in any substantial windfall for the other players.
According to Unwalla, companies in the commercial vehicle sector like Maruti Suzuki, Hyundai Motor, Kia Motors India Pvt Ltd and Tata Motors Ltd will benefit from the exit of Ford India.
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