Despite govt's fuel price cut, Ford's sales likely to take a hit in India

Ford India is concerned that owing to untoward market conditions, the actual growth might be lower by 0.5-1 per cent

With petrol prices still poised to hover at more than Rs 80 a litre despite the Centre’s announcement of a price cut, Ford India, the Indian unit of US-based vehicle major, Ford Motor Company, is concerned that its sales might get hit.

In turn with the industry, Ford India has been anticipating a 7-8 per cent growth in the current fiscal year, but Shripad Bhat, country director of government affairs at Ford India is wary that owing to untoward market conditions, the actual growth might be lower by 0.5-1 per cent.

“The way petrol and diesel prices and interest rates are going up, we are a little concerned. Historically, whenever fuel prices had reached an abnormal level, it has hit us badly”, Bhat told Business Standard.

Petrol prices in Delhi NCR rose by 0.15 per cent to touch Rs 84 per litre while diesel prices stood at Rs 75.45 a litre. The same in Mumbai stood at Rs. 91.34 and Rs 80.10 per litre respectively.

On the other hand, interest rates for new car purchase now range anywhere between 8.4-13 per cent depending on the bank and the loan tenure.

To combat this resultant lower growth projection Ford India is focussing on coming up with facelifts of its existing models – the latest being the Aspire sedan – backed by an additional warranty and other monetary benefits.

The company is offering a 5-year warranty on the facelifted Aspire which includes a factory warranty for two years followed by a 3-year extended warranty.

“So long it hasn’t affected us but if prices stay on the higher side constantly for 4-5 weeks, it does the damage”, he added.

Although the company registered an overall 20.95 per cent increase in its total sales at 19,988 units in September this year as against 16,525 units in the same month last year, on the domestic front, the company’s sales were down by 6.04 per cent at 8,239 units.

Ford-Mahindra strategic collaboration and EV

Since its re-entry into the Indian market in 1995, Ford so long has invested $2 billion to build its capacity, presence and network in this country. However, in a polarised Indian market dominated by Maruti and Hyundai, Ford has a 3.5-4 per cent market share and the company doesn’t see it increasing anytime soon. 

“Domestically it (India) is a very volatile market and is dominated by both big as well as niche players”, Bhat said.

In Tamil Nadu and Gujarat, it has two engine plants and assembly plants respectively with a total installed capacity of 0.45 million units. However, it has been utilising 56 per cent of the installed capacity of which more than 60 per cent are exported to over 50 countries.

Nevertheless, the official said that the company is on the lookout to find ways to leverage opportunities, including rolling out electric vehicles, new market opportunities and others, as it finds them and has thus entered into a strategic agreement with Mahindra and Mahindra.

The major areas of cooperation, which is valid for three years, encompass Mahindra & Mahindra’s support to Ford India to come up with electric cars while the former will get access to Ford’s global emerging markets, including its manufacturing and distribution network for a global foray.

“As part of the collaboration, we can also try to look at how we can leverage Mahindra and Mahindra’s distributorship network in India as well”, Bhat said.

Ford India, with around 400 dealers across the country, isn’t keen to expand its distributorship network but has been insisting its dealers open new touch-points in tier 2-3 cities. In this endeavour, while the company isn’t assuring any financial support whatsoever, it will help its dealers in sales, service and equipment support.

On the other hand, although Ford has globally committed $11 billion investment for development of electric vehicles (EV), its Indian subsidiary doesn’t see any part of this planned investment coming to India leaving it with the option to work out a collaborative model with other car manufacturers into the EV segment.

Bhat reasoned that the investment in EV in India has to be cost competitive and the EV technology from its parent might turn out to be “too expensive” in the Indian context.

Ford’s relations with Mahindra and Mahindra date back to its days of re-entering India in 1995 when both Mahindra and Mahindra and Ford had a 50:50 per cent stake in the joint venture company - Mahindra Ford India Limited under which Ford Escort was launched. Gradually, Ford increased its stake to 72 per cent by March 1998 and the joint venture firm was renamed to Ford India.

Under the British Raj, Ford had entered India in 1926 but shut down operations in 1954.