Ford's formula for growth: Low maintenance cost, focus on utility vehicles

It is well understood that for any multinational manufacturer the key to cracking the Indian car market is not just exciting cars at competitive prices — it’s a wide dealer network and impeccable after-service that really hold the key. So, over the last 18 months or so, Ford India has rewritten its handbook for 60 different sales and dealer processes. “When you come to buy a car, there's no reason why you have to hang around for three or four hours while you wait for papers to be signed, financials to be executed,” says Anurag Mehrotra, the country head for Ford India. 

Today, that last mile process has been pinched down to 45 minutes or less. “Any explanations for car operation and other technical know-how would be made available to the customer by a next day customer representative visit.” The dealer management system has been bolstered by a new platform that, among other things, sends messages to customers who are getting their cars serviced on the status of their vehicle every step of the way — when the vehicle is received by the workshop, when it is being worked on and finally when it leaves the service centre. 

Kavan Mukhtyar, partner and leader, automotive, PwC India, says, “Given the price options that car makers offer in India, buyers are extremely value-conscious which is why the whole play is about the cost of ownership.” His point is that for MNCs coming into India the challenge is not limited to getting a great product to the market. The product needs to also generate enough volumes to keep the local sourcing ecosystem humming. Mehrotra admits that feedback from dealers showed that sales was refusing to pick up — two years ago ago it had a market share of 2.1 per cent; in 2017, its share stood at 2.4 per cent, and is expected to jump further this year — because of the perception that Ford was an expensive brand. Over the years, localisation of parts increased from 65 per cent in 2010 to 85 per cent; so has the number of sub-assembly parts which means if a head-lamp is busted the whole unit does not require swapping. 

Take the Ford hatchback Figo. The small car which once had 200 sub-assembly parts, now has 800, implying even the smallest malfunctioning component can be changed, thus reducing the cost of repair for the owner. The basic service costs for an Ecosport for the the first three years, for instance, is under Rs 6,000 a year. In addition, Mehrotra says that parts are sold across 1,500 outlets — both online and in multi-brand outlets.

Utility vehicles (UV), which accounted for three per cent of the vehicles sold in 2013, has climbed to 16 per cent the last year and is expected to further rise to 24 per cent in the next three years, Mehrotra says. “In every segment, we see customers readily hand over checks when there is a vehicle that has the basic attributes or body-style of a UV.” Which is good for Ford because of the five mainstream cars that it sells, three are UVs. The challenge is that there are also dozens of other brands speeding down the same highway — such as Jeep Compass, Suzuki Brezza, Renault Kwid, Honda’s BR-V and so on. 

Which is why when the Ford Motor Co. reported its first quarter results for March a couple months ago highlighting its collaboration with the Mahindra Group that was signed in September 2017 to jointly develop new SUVs and electric vehicles for India and emerging markets, it was a sign of things to come. M&M has UVs in its DNA and while neither Ford nor Mahindra shared further details, if synergies are leveraged with Ford’s design know-how and Mahindra’s scale and distribution, the results could be game-changing. The collaboration cars are expected to roll out in 36 months. 

So how low can their pricing get given that its newest vehicle, the Freestyle — a compact UV launched a couple months ago — is priced lower than the Figo? The answer, according to Bhargava, is “if it fits the market and we can play to win in the segment, we will ‘never say never’.”

That sort of flexibility is at least part of the distance covered in a market as competitive as it is in India.