Riding The Figo

In the automobile industry, success hinges on the ability to get the right product into the market. It is something that Ford, one of the world’s biggest and most successful car makers, had failed to do in India for more than a decade. Resolute in its belief that the Indian market would move up to large cars, Ford bet on sedans, spelling disaster for the company. The Escort, launched in 1996 in a joint venture (JV) with Mahindra & Mahindra, gave Ford an entry into India. But the car did not do well, and the JV was dissolved in 2005. In 2000, Ford launched the globally successful Mondeo as a completely built unit (CBU), but that, too, did not fare well. The Ikon, launched in 1999, was a success initially, but after its highest selling 1.8-litre diesel version had to be withdrawn in 2007 because it did not meet emission norms, interest dwindled.

Fiesta, launched in 2006, has done better, accounting for more than 50 per cent of Ford’s sales since then. But it has not managed to take Ford’s market share in India beyond the 2-3 per cent range. Its premium hatchback, Fusion, and the sport utility vehicle (SUV), Endeavour, too, failed to set the charts on fire. And after Ikon’s 1.4-litre version was launched in November 2008, Ford did not launch any car in India, other than a revamped version of Endeavour. “Lack of new products hampered Ford’s growth in the recent past, while its competition brought out newer and more stylish products into the market,” says Ammar Master, senior market analyst for India and Korea at J.D. Power and Associates.

The only silver lining for Ford was that even with such lacklustre sales, it managed to break even in 2007, though it went into the red again in 2008 after pumping in $500 million of investments to implement its new strategy. And it is the early signs of success of this new strategy that has given Michael Boneham, president and managing director of Ford India, the confidence to brush off criticism of the company’s past performance. “Ford’s success will be determined by our customers when they use our new products,” he says.

NEW IMAGE: Nigel E. Wark, executive director for marketing, sales and service has constructed a people’s brand image for Ford India

The first new product and centrepiece of Ford’s current strategy, the hatchback Figo, has exploded off the starting blocks. In March 2010, when it was launched, the car sold 7,210 units, comprising 76 per cent of the firm’s sales that month. In April, Figo sold 6,030 units, but its share of Ford’s overall sales rose to 80 per cent. In both months, growth went through the roof.

Figo, however, is not the company’s only trump card; it is only the first in a long line of winners Ford hopes to churn out. In the forthcoming months and years, Ford will launch an all-out attack on all fronts, with new small cars every 12-18 months, plus sedans and SUVs. And all of them will be built around global CEO Alan Mulally’s vision of One Ford — which means a focus only on in-house ‘Ford’ brands and not on marquee brands that it had purchased in the past, such as Jaguar, Land Rover and Mazda.

After 15 years of being on the fringes of the Indian car market, Ford finally looks like a company capable of muscling into the mainstream. Apart from planning new cars, it is feverishly strengthening itself — adding more dealers, reducing the cost of spare parts, and devising more focused branding initiatives. It is also looking to export Figo and other forthcoming cars to South Africa, South-east Asia and North Africa. It wants to be among the top four auto companies in India by 2020, and thinks its current strategy is sound enough to help it reach that goal. Naturally, with competition in the small car market hotting up in India, it will be anything but easy for Ford.

Yankee Doodle No More
The success of Figo, and General Motors’ (GM) Beat, has changed a long-standing paradigm in the auto industry — that the Americans can’t make small cars, and that it is the domain of Europeans such as Volkswagen, Renault and Fiat, and Asians such as Suzuki, Toyota and Hyundai. And it came down to something as simple as a smile to signal the change.

At the New Delhi Auto Expo in January, when Lutze Kothe, chief general manager for marketing at Volkswagen India, announced that the company’s forthcoming car Polo would be a premium hatchback, the teams from Ford and GM attending the launch broke into huge smiles. Being a premium hatchback meant Polo would be priced higher than Figo and Beat, and would give the latter added advantage in the market. It also proved that the Yanks had finally mastered the art of making small, low-cost, but quality cars that could compete on equal terms with the Europeans, Japanese and Koreans, in key developing markets like India. Speaking to BW at the auto expo, Yoshinori Noritake, the chief engineer for Toyota’s Etios small car (and sedan) project, admitted that the Yanks had beaten Toyota to the Indian market, one of the fastest-growing car markets in the world in the next decade.

What is interesting is that apart from being priced lower (starting Rs 3.4-3.5 lakh), compared to Polo and Fiat’s Grande Punto (starting Rs 4.3-4.4 lakh), Figo and Beat have stood up well to technical scrutiny by experts against their European rivals, and even against hatchbacks from market leaders Maruti Suzuki and Hyundai. “The Polo offers a better power-to- weight ratio with a lower displacement diesel engine, but the Figo is an equally fun vehicle to drive with the 1.4 cc diesel engine,” says Shrawan Raja, an automobile engineer and managing editor of Indianautosblog.com from Chennai.

It has taken long to happen, especially for Ford. GM, which had bought bankrupt Korean company Daewoo in 2002, launched the tiny Spark, a rejigged version of Daewoo’s popular Matiz, in 2007. Since then, Spark has led sales of the company every month. GM took that learning ahead, and built the Beat in the Daewoo facility in Korea. Ford had to borrow from the old Ford Fiesta European hatchpack.

The New Ford
For the past four years, Ford was developing what it calls the B platform in the Asia-Pacific region (especially Australia). This platform, tailor-made for low-cost sedans and small cars, allows for high levels of localisation. Figo is part of this platform. For the past two years, Ford India realigned all its 119 vendors to localise the car up to 85-90 per cent. Localisation is an area that other challengers are also putting maximum efforts into, with GM boasting 85 per cent localisation for Beat, and Toyota and Nissan aiming for 80 per cent and 85 per cent localisation for their impending launches of Etios and Micra, respectively. On his part, Nigel E. Wark, executive director of marketing, sales and service at Ford India, is more concerned about the processes to deliver low-cost cars. “We cannot push vendors to make low-cost cars,” he says. “Low-cost comes with design, engineering and trimming processes through the production and supply chain.”