Exports Key to Shoring Up Ford India’s Fortunes

MUMBAI – Despite struggling for years to sell cars profitably in India, outgoing Ford CEO Alan Mulally believes the automaker’s India operation is positioned to become a global export hub.

“Markets are changing so swiftly that we need flexibility in our production system,” Mulally says earlier this month during a visit with Nigel Harris, president-Ford India and product-development chief Raj Nair in Chennai.

That flexibility is provided by Ford’s two recently expanded facilities in Chennai and two new plants opening this year in Sanand in Gujarat state, which will double the automaker’s manufacturing capacity in India to 610,000 engines and 440,000 vehicles.

“Ford has sharpened its India focus with new platforms, new models, new plants and double the capacity,” says Mulally, who was accompanied on his visit by CEO-designate Mark Fields and Robert Shanks, global chief financial officer.

Mulally’s belief that Ford India can deliver as an export hub overshadows the automaker’s difficulties in its home market, where it has lost money for 16 of its 17 years there. Losses through the end of the 2013 fiscal year exceeded Rs13 billion ($224 million).

The exception was fiscal 2012, when Ford India made a small cash profit of Rs1.4 billion ($25 million), only to see depreciation turn it into a Rs1.4 billion net loss.

Sales also have been uneven. A breakthrough came in 2010, when the introduction of the Figo B-segment hatchback helped boost deliveries 184%, according to WardsAuto data. The Figo’s novelty started wearing off, but demand recovered following the launch of the EcoSport CUV in mid-2013. The automaker recorded a 36.7% sales increase, to 32,565 units, through May.

Mulally believes Ford India can fulfill its potential beyond the country’s borders. The capacity expansion will allow the automaker to penetrate as many as 37 international markets.

Nearly 60% of global car purchases are for small and midsize models such as the B- and C-segment products the automaker builds in India. The country also is strategically located in the center of the Asia-Pacific and African export markets, and its automotive industry features a low cost structure, a high level of employee skills and a competitive production system.

Ford India’s export activity already is gathering steam. According to the Society of Indian Automobile Manufacturers, the automaker more than doubled its overseas shipments to 25,576 units in 2012, increased them to 29,316 in 2013 and saw them surge 64% increase  to 48,088 through May.

The flexibility of the automaker’s production system allows it to produce both the Figo and EcoSport on a single B-platform. Mulally notes the B-platform “is so versatile that it can support production of 200,000 vehicles on a single platform every year. Even more, eight to 10 different models can be built on the same platform."

A $142 million production line being built at the Gujarat plant can assemble 10 variants of any model with six different types of car bodies and three different fuel systems.

Ford’s experience with the Figo and EcoSport has shown India could become a good indicator of what brands or models, body types or engines people across the world may demand. But the emphasis on exports doesn’t mean Ford India is giving up on its home market.

Ford India calculations show new cars in the price range of Rs500,000 to Rs700,000 ($8,300 to $11,600) would be profitable on monthly sales of  3,000 units, while smaller models priced from Rs300,000 to Rs500,000 ($5,000 to $8,300) would break even on monthly sales of 6,000 units.

The automaker is launching three new cars in 2015: a new Figo with enhanced styling, more space and a new 1.0L EcoBoost engine with greatly improved fuel efficiency; a new compact Figo sedan featuring much better driving dynamics; and a spacious new fullsize, 7-seat SUV. All three will have Sync multimedia interface and preinstalled AppLinks and may be built on a single platform codenamed B562.

Looking beyond its products, Ford India is undertaking initiatives aimed at enhancing the customer experience, reducing ownership costs and ensuring affordable, comprehensive and transparent service.