US third-largest car market for India in FY18 after Mexico, South Africa

The US has quietly raced to become the third-biggest market for passenger vehicles (cars, utility vehicles, and vans) manufactured in India during the financial year ended March 31, 2018. With just $3 million worth of exports, the nation did not even figure in the top 80 markets in the previous year. But the value of shipments, according to the commerce ministry data, grew multiple times to $654 million (Rs 45 billion approx.) in 2017-18, thanks to a single product from one carmaker, Ford. The auto firm started exporting the EcoSport, the compact sport utility vehicle (SUV) manufactured at its Chennai plant, to the US last year. 

The export value of $654 million makes US the biggest market after Mexico ($1.69 billion) and South Africa ($666 million). The UK was the third-biggest market in 2016-17. At $654 million, the US accounted for more than 9 per cent of the Indian passenger vehicle exports, worth $7.1 billion, in 2017-18. 

US President Donald Trump has been pushing American carmakers to do more local production. “I want new plants to be built here for cars sold here,” he had tweeted last year, ahead of a meeting with heads of American car majors, including Ford and GM. Ford India is a subsidiary of American carmaker Ford Motor Company and has successfully exploited its Indian capacities to ramp up exports to several markets, including the US. 

Ford recently took over Korean carmaker Hyundai to become the biggest exporter of passenger vehicles from India. Ford India does not share the destination-wise data for exports. The company, however, sees the US as its key market. No other carmaker in India is known to be exporting a passenger vehicle to the US market. Ford EcoSport is priced at Rs 780,000 and Rs 1.18 million in the domestic market. If we take a conservative average realisation of Rs 1 million for exports, then approximately 45,000 units of the EcoSport may have been shipped to the US alone last year. This is a small volume, given the US annual demand of about 17 million units. 

Ford exported about 90,500 units of EcoSport to different markets last year, the data available with the Siam shows. 

For Ford, India is one of the six global hubs for manufacturing the EcoSport. Total volume of passenger vehicles exported by the industry stood at 747,287 units in 2017-18.

The pace of exports to the US seems even stronger in the current financial year. If we go by the pecking order for the first month, April, the US ranked as the second-biggest market with shipments worth $98 million. 

Mexico retained the slot with $151 million worth of exports, while South Africa stood third at $58 million. If this trend continues, the US may well race past South Africa to occupy second position.   

Ashim Sharma, partner and group head at Nomura Research Institute, said carmakers were increasingly looking to have one or a few countries as a specialised and cost-competitive hub for producing select models. 

“The US President may be pushing for local manufacturing, but the US is not the best place for making a small SUV like the EcoSport. The Indian cost of manufacturing is low and while being an export base, India also is a large enough market for vehicles like the EcoSport,” he said.