Trendsetter Ford exits India. What next?

Ford had become a part of life of the Indian car lovers for the past 26 years and now all off a sudden it has decided to exit from the Indian market. The US automobile pioneer announced that it is shutting its shop and leaving India, close on the heels of reports that Ford and Mahindra would jointly make vehicles in India. This development has also exposed yet again the uncertainties and challenges gripping the automotive sector in India.

Like many other automobile giants, Ford, which has been negotiating the slippery roads in India for 26 years, also faced the same catastrophe in the automotive industry. The factories in Gujarat and Chennai have been closed down.

Like Daewoo, Fiat, Porsche, Mitsubishi and GM, now Ford has also gone the same way though it managed to hold on for a long period in India. Thus India happened to lose some premier global cars.

What will the large number of dealerships and many car owners do from now onwards. Well there is no answer as of now.

Anurag Mehrotra, the president & managing director of Ford India, thanked its clients through a social media post while making the announcement in a video message. Whatever he said with a smiling face on social media however caused anguish to Ford customers.

What Ford will offer India now

Ford will continue to import to India its super cars like Mustang and Mach-E electric vehicles. Ford Figo, Aspire, Eco sport and Endeavour would be available till the availability of the stock with the dealers gets exhausted. These cars will receive service for nine years as per the law.

Revolutionary car-maker

Ford brought about revolution in America. A revolution bigger than communism. It put the common man in the car to make an equitable world, a reality. It was the first company which used technology for mass production, in the process changing cars from being a luxury item to a need. Americans had only seen a car from outside till Henry Ford's Model T was brought for first mass production. It  was the world's first car manufactured in the assembly line.

Ford managed to put all Americans in the car, quite literally, during the period between 1908 and 1927. Till then the facility was experienced and enjoyed only by the rich.

That's how Ford became popular.

Nearly a century-old India presence

Ford is not a new company as far as India is concerned. It has been in India since long. It has had a significant presence in India since 1926. In those days cars used to be imported from Canada and not America. It was Ford Canada which functioned in India first. Till 1953 Ford used to manufacture cars, pickups and trucks. But it was hit by stringent rules and regulations in India.

It was in 1995 that Ford resumed its nearly three-decades-long operations. It partnered with Mahindra for Mahindra Ford. The first vehicle it brought during the second coming was Escort. At a time when Indians were thinking that Maruti 800 was the ultimate choice following the gradual exit of Ambassador and Fiat, a boat shaped Ford Escort created waves. Professionals and big industrialists graduated from Maruti 800 to the king size Escort. This led to birth of new vehicle culture in the country.

Significance of Escort Zetec launch

Ford also introduced to India American media culture vis-a-vis the automobile sector. Prior to that none here had heard about the ritual of the first test drive for media persons. Thus I participated for the first time in a car test drive organised by Ford. There weren't many for the test drive of the new Ford Escort Zetec. The present-day popular auto publications including today's Auto Car did not exist then. No social media to cheer or hoot. Everything was silent. And there were less than 10 journalists from India for the test drive. These included Tutu Dhawan, Bob Rupani, Murad Ali Baig and Malayali auto journalist Bijoy Kumar. Only a small group. (At that time Bijoy was the editor of Business Standard Motoring. He left journalism and is currently the GM of Mahindra's Adventure division.)

Kochi-based P J Motors was the main dealer of Ford in Kerala in those days. Its owner, P J Varghese, who was following the Fast Track column for two years, wished that I should also be part of that test drive. Ford agreed.

Thus Escort Zetec (Petrol) left for Munnar from Kochi and came back. This was my first test drive and perhaps the first test drive by a mediaperson in India. This was followed by hundreds of test drives.

When Parker came to lead

The media drive led by Ford India CEO John Parker is one of the memories which will always remain with me. The 10 cars that followed him were packed by mediapersons and other Ford officials. Binoy and I comprised the Malayali team. Camp fire, product briefing and overnight stay was at Mahindra's resort at Suryanelli.

The next morning Binoy undertook a daring drive through the Gap Road. The sports tradition and power of the Zetec petrol engine were in full display along the narrow road. Parker and the dealer came out with explanations even on small issues related to the vehicle.

Parker led yet again

John Parker later led Ford to turn India into an exporting centre. The vehicle he envisaged for that purpose was Ford Ikon. As the name suggests, it was India's global symbol. Subsequently, as an auto journalist I was invited several times to the car manufacturing unit at Chennai. I was surprised when Ford accepted many of my suggestions. But later I realised that it was their tactics to understand the local market directly and function accordingly.

Not just in India but Ford Ikon became the Ford's icon in many developing markets across the world. Phil Spider, who succeeded Parker, also pursued the same path.

I continued my relationship with both even after they left India. There were reports that the duo would exit Ford by 2010.

So many cars and many more memories

It was Ford which designed luxury cars for India. Escort 1996-99, Ikon 1999-2011, Mondio 2001-06, Endeavour 2003, Fusion 2004-10, Fiesta Classic 2005-15, Figo 2010, Fiesta 2011-16, Ecosport 2013, Aspire 2015, Mustang 2016, Freestyle 2018. Ford launched models in all categories — middle range, high-end, hatchback, crossover, SUV and super car. Then why did they decide to wind up?

Record sales
When the sales reached the peak, the annual production touched about 1 lakh. The highest manufacturing was recorded in 2011 when the company manufactured 96,354 cars and in 2018 — 97,804 cars.

However, Ford production was always below 3 per cent of the total cars manufactured in India. The engine production at the Sanand unit in Ahmedabad continued in a good manner. About 45 per cent of car production and 25 per cent of engine production were exported from this Gujarat plant. These vehicles ran in 35 countries including America and Canada.

The Maraimalainagar unit in Chennai, which I had the opportunity of visiting several times, had the capacity of manufacturing 2 lakh cars and 2.4 lakh engines annually. The Ford unit in Sanand is spread over 500 acres. Its capacity is 5 lakh cars and 6 lakh engines.

Cars ahead of times

It was Ford which first brought modern cars to India. Right from the launch of Escort all the cars that were introduced by Ford in India were ultra-modern. Apart from Escort diesel and petrol, Zetec petrol which was launched in 1998 was the first car in India for rally purpose. Though not many cars of Zetec petrol series were made, it was the only high-tech car till the turbo petrol cars hit the roads recently.

Ikon and Figo

These two models enjoyed the pride of place among cars in India. Though Mondio came in the luxury sedan category after Escort, Ikon was the car manufactured in India for India. It was a sleek sedan. It was based on Europe's Fiesta platform. The sixth generation European Fiesta was launched in India as Figo. Both models were a huge success. The production capacity of Ford had to be increased significantly following the huge demand for Figo. Those who have used Figo once would never forget its stability and power. It is a strong hatchback model giving a solid feel.

Pioneer in many ways

Ford introduced many new things in the Indian market. It is another thing that the rivals adopted those novelties and achieved big success. Ford Fusion, which comes under the crossover category, was launched in 2004. There is still no car in India which could compete with Mondeo which was launched prior to Fusion. The only car in this category is Skoda superb. When tax relaxation was given for cars below the length of four meters, the first car to take advantage of the benefit was Ecosport crossover. The Ecosport manufactured in India was used in America as well. There are not many vehicles that could challenge the giant SUV like Endeavour then and even now.

Endeavour and Ecosport

It's been more than 25 years since Ford began its sales after a comeback, but never have so many bookings been received like now. Over 2,000 bookings for Ecosport and Endeavour are pending as the availablity of these models is scarce. I got this information regarding scarcity while speaking with Kairali Ford sales manager John, a few months ago. There is not much demand for Aspire, Figo and Freestyle.

It is certain that even if the dealership is shut, there will be buyers for Ecosport and Endeavour. That is what is called the "Ford Spirit".

What exactly happened?

This is the question on everyone's mind. But the answer is not simple. The probable reasons are adverse circumstances, reluctance to redress the complaints of consumers and dearth of good leadership.

The likely reasons for the collapse
Firstly, Mahindra washed its hands off. Mahindra Ford which was started in 1995 with 50 per cent equity became Ford India Ltd in 1998.

With Ford Motor Company taking over 72 per cent ownership, Mahindra was relegated to the gallery. Even though Mahindra, which still does not have a good car, made attempts to retain the relationship with Ford, it decided to snap ties completely earlier this year fearing financial setback. Ford was left alone.

Secondly, bad publicity about high maintenance cost. While the cars are best, it is difficult for many Indians to afford the high cost for maintenance and spare parts. There were similar problems in the beginning. But at that time the vehicle was mostly used by businessmen. The problem became serious once cars like Figo reached the common man and it also brought a bad name to the company. Though there were attempts at some rectification, it didn't come to the notice of the common man.

Thirdly, the intense competition in the market. Ford could not put up with stiff competition. Though Figo, Aspire, Ecosport and Endeavour were of high quality, Ford received a setback in hatchback and sedan categories which are key for scaling up sales graph and profit. When they realised that it was difficult to hold on for long with Ecosport and Endeavour, Ford failed to introduce new models in the market.

Fourthly, lack of leadership and tactics. Ford did not have a vibrant leadership in the last days. When sales division CEO Viay Piparsaniya, who rose from the ranks, left the company some time back, there were speculations about the closure of the operations. Vinay is someone who has served for a long period in the Ford leadership.

Fifthly, drastic setback in exports. Ford which is the biggest car exporter of India had recorded 65 per cent drop in exports last year. The export of cars came down from 131,476 cars to 46,064 resulting in sharp fall in profits as well. The demand for models manufactured in India came down in Europe and America and COVID-related factors also contributed to the crisis.

Sixthly, loss. Ford India has incurred a loss of $200 crore during the last decade.

The fate of dealerships

Ford India has 4,000 workers. A final decision has not been taken about them yet. Anurag has said that other manufacturers can continue production by manufacturing engine and other components . The sale of imported vehicles will continue. In short the brand name Ford will continue to exist in India.

But the big question is what will happen to the dealerships? There are 170 dealerships with 40,000 staff and Rs 2,000 crore investment. Each dealership has at least 1,000 cars. This itself will come to Rs 150 crore. Moreover, the Automobile Dealers Association has said that Ford had given new dealerships till a few months ago.

The association said the decision to end everything in one go has triggered a huge crisis. There is uncertainty over providing service to the existing owners of Ford cars.

Car! Please don't go

Car means Ford, so goes the saying. This is the kind of sentiment attached to the Ford car which is leaving India. One cannot trivialize the issue. True, the liking for cars is declining in India at the moment. After small hatchback, it is the SUVs which are in high demand. SUV designs built on hatchbacks are becoming popular. The sales of micro and mini-SUVs are also high. The demand for middle-level premium and sedan too is declining. Those manufacturers who are not shifting gears according to these changes are the ones who are actually at the receiving end.

The Ford story in a way indicates the bad times for cars in India!