Economic Times: June, 2015
Mumbai: The automotive world's most coveted market may finally see some made-in-India cars on its roads. Ford India's popular compact sport utility vehicle EcoSport may be shipped to the US for sale starting October 2017, multiple people familiar with the process said. Ford has already begun work on developing a face-lifted version of the SUV for the North American markets. It has also kicked off a preliminary tendering process to source components.
The request for quotation put out by Ford is for as many as 90,000 units a year, which is more than the number of vehicles it sells in India.
No US car maker has ever exported cars made in India back to its home market. If Ford gets the green signal, it will mark a historic first not only for the American car maker but also for India, which has built a robust manufacturing base for car exports thanks to investments by Hyundai, Maruti, Ford and other auto giants over the years.
Made-in-India cars have been exported to many markets, including those in Europe. India is already a key export base for Ford Motor — it ships India-made compact vehicles to Europe. Mahindra & Mahindra had plans to take a pickup version of the Scorpio to the US, but that hasn't happened.
Motorcycles made by Royal Enfield and KTM, and Mahindra's tractors are sold in the US. A Ford India spokesperson said the company "would not like to comment on speculation around future product and manufacturing plans".
In a recent interview with ET, Ford Motor Chief Executive Mark Fields said he wouldn't rule out the possibility of exporting from India to the US. "In business, you never rule out from the beginning certain opportunities. But it all comes down to making sure first and foremost that wherever the product is manufactured, you want to make sure that it is high quality and meets the expectations of consumers," he had said.
THREAT FROM THAILAND
But the biggest threat to India's chances come from Ford Thailand, which too is competing for the order to supply the SUV for the US and Canadian markets. "The plan for exports to the US from Asia was there right from the start. As the company was globally restructuring operations, the clarity on whether India or Thailand was being studied," said one of the people.
"It seemed that the project will go to Thailand in 2014, but now the company has begun discussions with Indian vendors to source additional US volumes from India."
Ford entered India two decades ago and has so far invested more than $2 billion (Rs 12,800 crore at current exchange rate), but is still struggling to turn profitable — it is currently sitting on accumulated losses of more than Rs 1,000 crore.
As local demand didn't match expectations, it decided to export vehicles from India, starting with the Figo hatchback in 2010. Its plan was to ship 30-40% of total production, but in the past two years it exported more than half the local output. In the fiscal year ended March 31, 2015, Ford India exported 78,814 of the 1.53 lakh vehicles produced in India. The EcoSport accounted for almost 70% of the shipments.
ECOSPORT PRODUCTION BASE
Higher utilisation of the manufacturing facility to cater to exports helped Ford India reduce its production cost per car and the company is operationally profitable now, people in the know said.
Thanks to demand from some of the overseas markets, the unit operated the Chennai factory 24X7 for the first time in the second half of last year.
Once the US volume kicks in, the plant is likely to transform into an EcoSport production base, with a small assembly base for the new Endeavour SUV and Fiesta sedan, the people said.
Rakesh Batra, partner and national leader for the auto sector at consultancy firm EY, said if the plan fructifies, it will be an important milestone for India's automotive industry.
"Certainly, in Ford's global network, India may have attained the confidence of delivering cost, quality and desired volumes, as the logistic cost of shipping vehicles out of India is quite high. A sizeable volume also helps in improving capacity utilisation and thereby cost per unit, plus rupee depreciation also helps in improving competitiveness of vehicles manufactured in India," he said.
If Ford ships its vehicles to the US from India, it will give confidence to other manufacturers too to explore such opportunities, he said. Japanese two-wheeler maker Yamaha already exports India-made R15 150cc sports bike to its home market, selling it in the entry-level segment.