Automakers have been targeting the Asian market quite aggressively, and India seems to be among one of the most lucrative opportunities in the continent. Although India might not be able to match the growth witnessed in the automobile market in China, it is expected that 9.3 million units will be sold in the country by 2020. So, global automobile majors such as Ford (NYSE:F) and many more are now targeting the Indian market.
Ford is currently targeting small passenger cars and mid-segment cars as it sees maximum potential in these areas. This is not surprising, considering passenger vehicle production in India is expected to reach 10 million units by 2020 to 2021. This segment of the Indian auto industry is expected to grow at a CAGR of 13% during the period 2012 to 2021, and automakers are targeting this.
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The Indian Opportunity
The following points further suggest why leading automobile players such as Ford are keen on the Indian market:
- India is projected to become the fourth-largest car market by 2015, overtaking the likes of the UK, Germany and France.
- India and China are expected to become important markets in the global automotive scene in the future.
- India is anticipated to become a part of the biggest automotive markets in the next two decades.
- Booz & Co. predicts that automobile sales in India may exceed the U.S. market in two decades.
Looking at the car market in the Asia Pacific, Ford invested over $2 billion in the region last year. Ford projects that around 40% of its revenue will be generated from the Asia Pacific region as it is the fastest growing car market in the world.
There is no better example of Ford’s success story in this market than the EcoSport, which was launched in India last year. The Ford EcoSport was undoubtedly one of the most successful launches of 2013 in the Indian automobile industry. Its success is exemplified by the fact that it has been over-booked, and Ford has stopped all new bookings. Customers are waiting for Ford to re-open bookings.
Going forward, the U.S. carmaker is all geared up to launch a right-hand drive version of its popular Mustang by 2015, and India appears to be one of the probable markets for its debut. Besides India, Ford is all set to launch the Mustang in various other countries like Australia and the UK. In India, Ford has been selling cars for the mass market, but with the introduction of the Mustang, it will also have aspirational value.
Ford’s Indian Performance
Ford witnessed rapid growth in sales in India in 2013, and it is confident about its performance in 2014. Ford India recorded sales of 12,050 units in November 2013, up 19% from the year-ago period. Ford’s sales hit a record December high of 11,209 units in 2013, and the company ended the year with total sales of 119,715 units.
In 2013, Ford India exported 39,284 vehicles to over 40 different countries. The growth in Ford’s car sales in India was despite a sluggish car market in the country in 2013. Looking ahead, Ford expects industry demand for B-segment vehicles to double in India, and demand for sports utility and multi-activity vehicles are expected to triple between 2012 and 2017. These are the two areas where Ford is currently concentrating with its Figo and EcoSport models in India, and along with more launches in the future, it should continue gaining further.
Ford’s Infrastructure Improvement
Ford is also targeting to increase it export revenue from India. It has enhanced its production capacity by setting up a manufacturing facility and an engine manufacturing plant. Ford is looking at a production capacity of 440,000 vehicles and 610,000 engines from India, which should help it satisfy demand for both the domestic and export market.
Ford also anticipates that by 2020, the market for small vehicles globally will be around 60% of the total automobile market, with the Asia Pacific and Africa accounting for half of the volume. Currently, Ford is focused on small vehicles, and it has found big success in this department with the Figo, which is a precursor to how it might do globally as the market expands.
Ford is focusing on the emerging markets, and considering the number of new vehicles that Ford will be launching globally going forward, investors can expect robust top and bottom line growth. Ford has models to target both these segments and as it introduces new models in the future, investors can expect better returns.