New Delhi: Alan Mulally wants to sell Sandeep a car. Ford Motor Co.’s chief executive officer isn’t happy being ranked eighth in the Indian car stakes, and wants to be up there with the Marutis and the Hyundais. The problem is no small car wears a blue oval on India’s roads.
On Wednesday, Mulally will announce a small car for Sandeep, a name the firm chose to represent Ford’s typical customer. Aged about 26-27, newly married but still living with his parents, buying a car will be among his first major post-nuptial decisions. Mulally is to unveil the small-car in Delhi, with a production date set tentatively for March.
Market survey: An ‘immersion’ event where Ford interacted with ‘Sandeeps’ to understand their preferences.
Ford’s ambitions for the small car are not modest. “From an India perspective, from where we are right now in terms of market share, we want to at least quadruple it,” Michael Boneham, president and CEO of Ford India, said in an April interview. That’s from a share of 1.5% right now, so the bulk of the new sales will come from the car being showcased today.
India’s 1.5 million car market is dominated by small cars such as Maruti Suzuki India Ltd’s Alto, Hyundai Motor India Ltd’s Santro and Tata Motors Ltd’s Indica, squeezing manufacturers such as Ford and General Motors India Pvt. Ltd to the bottom of the table in terms of volume. While GM has made efforts to rectify this with the launch of the Spark in 2007, others such as Ford and Toyota Kirloskar Motors Ltd have missed out thus far.
“Small-car sales already make up 70% of car sales in India, and this is only likely to grow as more two-wheeler owners start moving to cars,” said Puneet Gupta, an analyst at CSM Worldwide Inc., a forecasting firm. Gupta predicted that small cars are likely to make up an even larger share by 2015 as rising incomes make them more affordable.
India’s auto industry has been among the first to recover from the global slump that shook every car maker globally in 2008. Car sales rose by nearly one-fourth last month to 120,669 units, albeit from a low base. Brisk sales have prompted the Society of Indian Automobile Manufacturers (Siam), which till recently had projected a 5% growth in sales this fiscal, to say it may revise its forecasts higher next month.
Auto companies have realized that the small car is key to cracking the Indian mass market. General Motors Corp.’s India subsidiary plans to introduce another small car at January’s auto expo in New Delhi, while Toyota will launch its offering in December. Volkswagen India Pvt. Ltd will launch the Polo early next year.
Convincing Sandeep to consider Ford’s products when he shops for his car is an increasingly important aim for the company as it seeks to get a leg up in the world’s second fastest growing auto market.
A few months ago, Ford set about building its understanding of what was an entirely new customer segment for the company in India.
The company addressed this through an “immersion” event with its target customers. “I’ve been working with Ford for 40 years and you get out of touch with different generations, different ways of thinking, how they approach a car...” explained John Parker, Ford’s executive vice-president, Asia-Pacific and Africa, in the interview with Boneham.
In March, senior managers from Ford and its advertising agency JWT spent an afternoon with at least a dozen Sandeeps in cities across India. The aim: to understand their aspirations, and the products and icons they relate to. This has gone towards helping the company craft its marketing and advertising strategy.
In one instance, volunteers were shown magazines and asked what appealed to them. As a representative from JWT flipped through the pages, Bollywood actor Shah Rukh Khan was endorsed but his older counterpart Amitabh Bachchan given the thumbs down.
Largely insulated from the global financial crisis, Ford noticed that the newly married the newly married Sandeep was in a hurry to get on with life. Purchasing a car was, in many cases, a major decision looming on the horizon.
Living at home meant that his parents (and new wife) had a say in what car he planned to purchase. Ford plans to tap television as well as print and Internet advertising to get its message across.
“Mass (medium of) communication in this country is television—followed closely by (the) press and the Internet,” said Nigel E. Wark, executive director for sales and marketing at Ford India. He declined to provide further details on the advertising strategy.
The men in the group were assertive and rarely hesitated to voice their opinion. Dressed in blue jeans and a T-shirt, Arjun Handa, a software professional with HCL Technologies Ltd, couldn’t wait to get his own car. Recently married, he still shares an Alto with his parents. He plans to buy a car before year-end and said he’ll only consult one family member. “I’ll ask my dad for suggestions but it will be my decision,” he said.
Later that afternoon, the Sandeeps made their way to various stores in an up-market shopping area in New Delhi.
With Rs3,000 to spend, they’d been asked to buy anything that caught their eye. Here, Ford got a peek into the price-conscious Indian customer who only buys when he needs to.
After visiting several stores, Akshay Malhotra bought a shirt “because he needed it”. He chose to pocket the rest of his money. Someone else bought a cellphone. Again, because he needed it.
Like other manufacturers that have successfully cracked the Indian market, Ford says it has taken care to incorporate requirements unique to it.
India’s scorching summers prompted it to put in “improved” air conditioning. And with flooded roads forcing cars to wade through water, the car comes with a raised suspension. Ford is keeping the name of the car and its cost under wraps, but with localization of as much as 80%, the sticker price should give the competition a run for its money.
Tomorrow: Alan Mulally on the new small car, the company’s plans for the Indian market and the current state of the auto industry.