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What went wrong with Ford in India and who will benefit from its exit? - Chennai News

Chennai, Sep 11 (IANS) A combination of factors like wrong-reading of the market/product design/positioning and huge investment in a second plant when the first plant capacity itself was not fully utilised, resulted in US auto major Ford Motor Company biting the dust in India, said industry experts.

Updated Sep 11, 2021 14:18 PM

What went wrong with Ford in India and who will benefit from its exit? - Chennai News

The exit of Ford will benefit companies who are in the utility vehicle space, they added.

At a time when Asian car makers have captured the market in the US, it was nothing but natural for the American automobile companies -- General Motors and now Ford -- to sputter and stop in India if they get their basics wrong.

Ford India Private Ltd recently announced that it will wind down vehicle assembly in Sanand plant in Gujarat by the fourth quarter of 2021 and vehicle and engine manufacturing unit in Chennai by the second quarter of 2022.

"Simply put, Ford did not read the Indian market correctly. In the late nineties and later small cars dominated the market. Maruti was ruling the roost and Hyundai Motor came and launched its Santro and captured a sizeable market," an automobile industry expert told IANS preferring anonymity.

He also said Ford did not fully customise its car platforms. India is a right hand drive market whereas in the US it is left hand drive.

"Some of the Ford India's car models, the owner-driver, had to get down, go around the vehicle, open the left side door to unlock the boot, certainly a tedious affair," the expert pointed out.

"Different factors at different points of time played against Ford India and affected the company cumulatively. The three factors - product, pricing and positioning -- were improved over the years. With Ford facing trouble globally it has to cut down its losses," another industry official not wanting to be named told IANS.

For a long time, the small car segment was the sweet spot for car makers in India.

Maruti Suzuki India Ltd and Hyundai Motor India Ltd cashed in on launching new models at different price points.

But Ford and General Motors failed to do so as they didn't have a small car in their global portfolio.

"Their initial attitude towards the Indian market was something like this - you ate the pizza and burger that were launched. So, drive the model we offer. But the pizza and burger companies Indianised their products while the American car makers didn't do that," the expert said.

Ford's American officials were confused when the media asked about the vehicle's mileage per litre as they were focussed on engine power. Ford looked at the Indian market through the US prism, recalled a journalist.

Ford has been operating in India for over 20 years now. The company came in as a 50:50 joint venture partner with Mahindra & Mahindra Ltd and later increased its stakes.

The first car that was launched was the Ford Escort, with an idea of having a product on the Indian roads rather than spending time designing one for the Indian market.

Later Ford India set up its plant near Chennai with the Tamil Nadu government offering attractive tax incentives like sales tax deferral for some years.

The first car that was rolled out of the Chennai plant was Ford Ikon.

Since then, Ford India has been largely an 'one model' company, that is, only one model will log higher sales.

Meanwhile, the Asian players like Maruti Suzuki and Hyundai Motor launched new models.

Ford India later added models like Figo, Fusion, Aspire, EcoSport, Endeavour and Freestyle.

"Though the number of vehicles sold in India rose manifold over the years, the company has not been successful in gaining much market share in the passenger vehicles (PVs) segment. In FY2000, Ford sold 8,000 PVs in India, which grew to 93,000 units in FY2019. But market share growth was negligible from 1.1 per cent in FY2000 to 2.8 per cent in FY2019. Volumes sold in FY2020 and FY2021 further fell to about 66,000 and 48,000 units respectively," Vahishta Unwalla, Lead Analyst-Industry Research Team, Care Ratings Ltd told IANS.

Even as there was a huge capacity at its Chennai plant, Ford India spent about $1 billion to set up a plant in Sanand in Gujarat.

"Without expanding the Chennai plant capacity by 30 per cent, investing in a greenfield facility at a huge investment was a wrong strategy. A company runs into loss not only due to lack of sales but also due to its investment decisions," V.G. Ramakrishnan, Managing Partner, Avanteum Advisors LLP told IANS.

According to Ford India, the accumulated operating losses of more than $2 billion over the past 10 years and a $0.8 billion non-operating write-down of assets in 2019 has resulted in its decision to shut down its two plants.

"The investment was logical as per the plans that the company had at that point of time. But it didn't work out later," a Ford India official told IANS.

According to Ramakrishnan, Ford didn't have a product for the market.

"Global companies first draw out a product plan for a country, say India plans. Then it becomes part of the Asia Pacific product plan and then the global product plan," Ramakrishnan said.

Viewing the Indian market from the global level the numbers might not have been encouraging for developing a new product for Ford.

It was not so for others. For Suzuki Motor of Japan, India was a major market while Hyundai Motor made India as a global production hub for small cars.

According to Unwalla, nearly half of the units that Ford sold in India were utility vehicles with popular model offerings like Ecosport and Endeavour. Within the multi-utility vehicle segment, Ford's share peaked to 9.5 per cent in FY2015, but started falling in all successive years. In FY21, this fell to 3.3 per cent.

"However, the market share in the utility vehicle segment of competitors like Maruti Suzuki India Ltd grew from 12.4 per cent in FY2015 to 21.6 per cent in FY2021. Also, Hyundai Motor India Ltd market share grew from 0.3 per cent in FY2015 to 20.2 per cent in FY2021. Hence, this shows that Ford has been unsuccessful in gaining or maintaining its market share," Unwalla added.

With Ford India not a major player in any car segment, its absence will not result in any substantial windfall for other players.

According to Unwalla, companies in the utility vehicle space like Maruti Suzuki, Hyundai Motor, Kia Motors India Pvt Ltd and Tata Motors Ltd shall benefit by the exit of Ford India.

Disclaimer: This story is auto-aggregated by a computer program and has not been created or edited by FreshersLIVE.Publisher : IANS-Media