New Delhi: In 1995, whenFord Motor Co. entered the Indian market, two of India’s top three car makers today— Hyundai Motor Co.‘s local unit and homebred Tata Motors Ltd, then a truck maker—had not even started making cars in India. On the face of it, the company had everything going: a global brand name not unfamiliar to many Indians and a reliable joint venture partner, Mahindra and Mahindra Ltd.
New strategy: Ford India managing director Michael Boneham. The company has adopted the approach of pricing its products aggressively. Harikrishna Katragadda / Mint
Today, Hyundai Motor India Ltd, which launched the Santro in 1998, and Tata Motors that started accepting bookings for its Indica model in January 1999, are safely ensconced in the second and third spot in the India car hustings. Ford, meanwhile, finds itself in sixth place, behind its counterpart General Motors Corp., with a 2.1% market share.
Ford is trying hard to change that.
With recent events in the US—where Ford together with General Motors Corp. (GM) and Chrysler Llc. is seeking government bailouts—India may not figure on its Michigan, US-based parent’s to-do list but Ford India is still pushing ahead with its ambitious $500 million, or Rs2,390 crore, investments in India, restructuring operations and recasting its product portfolio.
“We’re a cash-positive business,” says Michael Boneham, president and managing director of Ford India Pvt. Ltd. He also points out that unlike GM and Chrysler, Ford is not facing a short-term liquidity issue.
On the initial years of Ford in India, John Parker, who was the first chief executive of the joint venture Mahindra Ford India Ltd, says, “One of the key issues we had then was a corporate product plan that was not ideally suited to India. We didn’t have, in our armoury, those small car products that were going to drive us into India.” Based in Thailand, Parker is now Ford’s executive vice- president for Asia and Africa.
Ford India, Parker says, has now been integrated into the global decision-making structure. This is unlike in the 1990s when plans were made separately for each region and India was mostly seen as a sleepy backwater.
As car markets in America, Europe and Japan slow significantly, all car makers are increasingly pinning their hopes on the developing world to ride them out of the slump. Car sales in America saw a 37% monthly drop in November. Europe and Japan fared only a little better. As a result, China, Russia, India and to a lesser extent Brazil are seen as key to reviving their flagging fortunes.
In India, Ford plans to shift gears and aims to grow at a much faster clip. The company has committed $500 million worth of investments in its Indian operations and plans to launch a small car in 2010 and drive into this fast growing segment.
To be sure, most foreign car makers in India have ambitious plans similar to Ford’s. Honda Motor Co.’s local unit has christened its small car, Jazz, and plans to introduce it next year. GM has already tasted blood with the Spark and plans to introduce another small car.
But, for Ford, the stakes are higher and it has more on its plate. The company is not very high on customer loyalty lists and its cars are perceived as being expensive to maintain. It will need to take care of both the issues to increase its market share. The company sold 36,385 cars in fiscal 2008.
Analysts say the company’s lack of Indianness has been a problem. It has so far failed to understand the nuances of the local market but they also acknowledge that the company is now trying to fix that.
One strategy the company is employing: price its products aggressively. Ford surprised market watchers by pricing the diesel version of the Ford Ikon very competitively at Rs5.19 lakh. “I believe the small car will be competitively priced,” says Hormuz Sorabjee, editor of Autocar India, predicting Ford’s smaller car may be “closer to the Swift but priced like the Santro”.
The Swift is a sporty 1.3-litre engine capacity car from market leader Maruti SuzukiIndia Ltd’s stable and its prices start at Rs4.61 lakh.
In anticipation of its small car launch, plans to boost both marketing and branding are already afoot at Ford. This, the company believes, would be crucial to its success, as it makes the transition from a mid-sized car maker here to one that has a presence across all segments.
For the first time, for instance, the company has moved senior management out of Chennai where all its top executive officers have been based until now. Timothy Tucker, vice-president for sales, a new position created in the company, moves to New Delhi.
Tucker’s brief: strengthen the Ford India dealer network and call on corporate clients making fleet decisions.
“We’re not happy that we don’t have a person in Delhi and we’ve now changed that,” says Boneham. The national capital region (NCR) accounts for almost one-quarter of Ford’s sales here and the company believes it will stay at this level in the years to come. The region also accounts for around one-fifth of all cars sold in India.
Besides the NCR, Punjab and Mumbai markets are other key markets for the company.
In the run up to the small car launch, Ford plans to spend the next year further strengthening its existing network of 132 dealerships. The company believes it is well represented in urban markets but needs to add more dealerships in so-called tier II and tier III cities that are likely to see demand for its small car.
Ford has also, for the first time, sought to play down its image of a company selling cars that are expensive to maintain. Last month, at the launch of a diesel version of the Ikon, Ford went an extra step to emphasize not only its competitive purchase price but also its low maintenance cost when compared with other cars in the same range.
Small car buyers are not going to be as forgiving of expensive maintenance costs and so getting this message across is one of the most important challenges Boneham faces. Ford dealerships now have direct maintenance costs comparisons for Ford cars and its competitors’ models.
Ford India has received at least 2,000 orders for the diesel Ikon and plans to make deliveries by the end of January.
Some customers such as Ritesh Malhotra, who bought his first Ford car in 2004, seem converted. He had heard about high maintenance costs for Ford cars but his experience has proved that the car is reasonably cheap to maintain. “Servicing costs have never exceeded Rs2,500-3,000,” says the vice-president at Indiabulls Group, a financial services firm. His only concern: mileage. He now plans to sell his car and says he may stick with Ford and buy the Fiesta.
For now, though, convincing new customers to take that initial leap of faith is a significant challenge Ford India faces. That could be critical, as much as its parent’s future, to the car maker’ success here.