Ford has booked over 40,000 orders for its subcompact EcoSport SUV since the model was introduced to India at the end of June. But that’s not enough to keep Ford’s Indian factories booming, so the company is shifting its strategy. Photo credit: Ford Motor Co.
Ford Motor Company (NYSE:F) was late to the Chinese auto boom, but the automaker has been making up for lost time in impressive style.
Ford Motor Company (NYSE:F)’s recent sales gains in the world’s largest auto market have far outpaced the industry, and the company is investing big to support even more growth over the next few years. But being a latecomer in China has cost Ford: It’s unlikely to catch up with market leader General Motors Company (NYSE:GM).
Ford Motor Company (NYSE:F) CEO Alan Mulally isn’t one to make the same mistake twice. Ford has also been investing big in India, hoping to “get in on the ground floor” in what many have suggested is likely to be the next big emerging auto market.
But sales gains in India have so far eluded Ford. On Wednesday, the Blue Oval announced a big change in strategy: It’s going to turn India into a key export hub.
The problem: a big investment in factories for a market that hasn’t quite materialized
Here’s why this is a big deal. Ford Motor Company (NYSE:F) already has a big manufacturing site in India, at Chennai, that can make up to 200,000 vehicles a year. It currently makes the Figo, an India-only model based on an older Fiesta design, the current-generation Fiesta, and the Endeavour, a midsized SUV geared toward emerging markets. It added the EcoSport, a subcompact SUV that shares some underpinnings with the Fiesta, at the end of June.
Ford also has another facility under construction in Sanand that will add another 240,000 vehicles a year in potential production capacity. (Ford Motor Company (NYSE:F) hasn’t yet announced what it will be making there, but versions of the Focus and Escape seem like a good bet.)
That’s a lot of production capacity. But lately, Ford’s sales in India have been running around 11,000 a month – including the vehicles that Ford makes in India and exports.
Do the math, and you see the problem: Ford will soon have the ability to build 440,000 vehicles a year – and over 600,000 engines – for a market that is taking fewer than 150,000 Fords per year right now.
Put another way, Ford Motor Company (NYSE:F) invested big bucks in anticipation of growth that hasn’t arrived – at least, not yet. And nothing piles up losses for an automaker faster than factories that aren’t working at anywhere near their capacity.
That’s a sour lemon for Ford. But on Wednesday, Ford explained how it is going to try to make some lemonade.