case study report ford ecosport

Case Study Report/Group-5/Ford EcoSport 1 | P a g e

A Case Study Report

On

“Ford EcoSport – A Game Changer for Ford India Private Limited and Indian

Automotive Industry”

BUSINESS STRATEGY PROJECT

Submitted to: - Submitted by: -

Prof. N P Prabhakar GROUP NUMBER - 5

Prateek Tyagi

Prerna Bhardwaj

Ramu Chhetri

Ravi Pareek

Ritu Soni

Rohit Vatwani

Saanya Gupta

Sakshi Dhawan


Executive Summary

We, Prateek Tyagi, Prerna Bhardwaj, Ramu Chhetri, Ravi Pareek, Ritu Soni, Rohit Vatwani,

Sakshi Dhawan and Sanya Gupta menbers of Group number 5 of section-J doing a case study

report on Ford EcoSport: A Game changer for Ford India Pvt. Limited and Indian

Automotive Industry. American auto king, Ford recently launched EcoSport to increase

their market share and decrease the debts of Indian market. With a competitors in every

segment, because EcoSport is not into one single segment as it caters many like in terms of

price we can compare Ecosport with Swift Dzire of Maruti Suzuki which is a sedan, highest

model of Polo (Volkswagen) which actually a hatchback, Honda Amaze which is

combination of hatchback and sedan. EcoSport is positioned as SUV in India so segment

wise its competitors are Duster of Renault, XUV 500 of Mahindra, Scorpio of Mahindra and

Ertiga of Maruti Suzuki. Hence Ford is trying to tap all the segments through this low cost so

called SUV. Ford invested around USD $142 million in Chennai plant for the manufacturing

of Ford EcoSport to reduce the cost in terms of tax, outsource and import of material because

they are getting most of the material from local supplier itself and they are also following

“Child Parts Strategy” to maintain this low cost of ownership vision. Ford EcoSport changed

the whole game of Indian automotive industry in past 4 months after the launch as the waiting

time reaches to highest point of 9 month for any car in India with 30,000 booking in just 17

days of launch in the time where other players running for every single customer because of

crises. Change of strategy and understanding of basics of Indian market works for Ford this

time. But the recall made by Ford (around 970 diesel variants) because of a big technical

glitch made a black mark on the EcoSport’s customer along with the long waiting time. This

will hamper the call of Indian customer to EcoSport or will cause a non-creating positive for

Ford’s EcoSport to gain more publicity among all regarding the phrase “Yes we care for

you”, which will be an interesting look out for us.

The Indian Automobile Industry

The automobile industry is one of India’s major sectors; accounting for 22% of the country’s

manufacturing GDP. The Indian auto industry, comprising passenger cars, two-wheelers,

three-wheelers and commercial vehicles, is the seventh-largest in the world with an annual

production of 17.5 million vehicles, of which 2.3 million are exported. Two-wheelers

dominate the Indian market; more than 75% of the vehicles sold are two wheelers. According

to Ministry of Heavy Industry and Public Enterprises, the total turnover of the Indian

automobile industry was estimated at USD 73 billion and exports were estimated to be USD

11 billion in the year 2010–111. The announced cumulative investments in this sector were

USD 30 billion during this period. The main automobile hubs in India are based at Chennai,

Gurgaon, Manesar, Pune, Ahmedabad, Halol, Aurangabad, Kolkata, Noida and Bangalore.

Chennai is the biggest hub accounting for 60% of Indian auto exports. According to the

Department of Industrial Policy and Promotion (DIPP), the auto sector accounts for 4% of

total foreign direct investment (FDI) inflow into India. As per the DIPP’s FDI figures for

May 2012, FDI inflow into the auto sector for the period April 2011 to March 2012 totalled

USD 923 million; cumulative FDI into the sector for the period April 2000 to May 2012

stood at USD 6,853 million. The Industry was not always this glorious. It has come a long

way since the first motorcar was imported and import duty on vehicles was introduced about

a hundred years ago. Indian Great Royal Road (Predecessor of the Grand Trunk Road) was

conceived2. The first car brought in India was by a princely ruler in 1898. Simpson & Co

established in 1840. They were the first to build a steam car and a steam bus, to attempt


motorcar manufacture, to build and operate petrol driven passenger service and to import

American Chassis in India. From 1888 Motors Spirit attracted a substantial import duty. In

1919 at the end of the war, a large number of military vehicles came on the roads. In 1928

assembly of CKD Trucks and Cars was started by the wholly owned Indian subsidiary of

General Motors in Bombay and in 1930-31 by Ford Motors in Madras, Bombay and Calcutta.

In the year 1942, Hindustan Motors Ltd was incorporated and their first vehicle was made in

the year 1950. And Premier Automobiles Ltd was incorporated in 1944 and in 1947 their first

vehicle was produced3.

In 1953 the Government decreed that only firms having a manufacturing program should be

allowed to operate and mere assemblers of imported CKD units be asked to terminate

operations in three years. Only seven firms namely Hindustan Motors Limited, Automobile

Products of India Limited, Ashok Leyland Limited, Standard Motors Products of India

Limited, Premier Automobiles Limited, Mahindra & Mahindra and TELCO received

approval. A few more companies came up later. Government continued with its protectionism

policies towards the industry. The major factors affecting the industry's structure were the

implementation of MRTP Act, FERA and Oil Shocks of 1973 and 1979. During this decade

there was not much change in the four-wheeler industry except the entry of Sipani

Automobiles in the small car market. During the seventies the economy was in bad shape.

This and many specific problems affected the Automobile Industry adversely2, 3.

The Maruti Udyog Ltd was started in the year 1983 in collaboration with Suzuki, a Japanese

firm. Other three car manufacturers namely, Hindustan Motors Ltd., Premier Automobiles

Ltd., Standard Motor Production of India Ltd. also introduced new models in the market. At

that time there were five Passenger Car manufacturers in India - Maruti Udyog Ltd.,

Hindustan Motors Ltd., Premier Automobiles Ltd., Standard Motor Production of India Ltd.,

Sipani Automobiles. In 1983-84 Bajaj Tempo Ltd. entered into collaboration with Daimler-

Benz of Germany for manufacture of LCVs. Important policy changes like the relaxation in

MRTP and FERA, de-licensing of some ancillary products, broad banding of the products,

modifications in licensing policy, concessions to private sector (both Indian and Foreign) and

foreign collaboration policy etc. resulted in higher growth and better performance of the

industry than in the earlier decades4. Beginning with mid-1991 the government of India made

some radical changes in its policies bearing on trade, foreign investment, exchange rate,

industry, fiscal affairs and so on. Mass Emission Norms were introduced for in 1991 for

Petrol Vehicles and in 1992 for Diesel Vehicles. In 1991 new Industrial Policy was

announced. It was the death of the License Raj and the Automobile Industry was allowed to

expand. Further tightening of Emission norms was done in 1996. In 1997 National Highway

Policy was announced which had a positive impact on the Automobile Industry. The Indian

Automobile market in general and Passenger Cars in particular have witnessed liberalization.

Many multinationals like Daewoo, Peugeot, General Motors, Mercedes-Benz, Honda,

Hyundai, Toyota, Mitsubishi, Suzuki, Volvo, Ford and Fiat entered the market. In 1999 the

Supreme Court passed an order directing all car manufacturers to comply with Euro I

emission norms (India 2000 norms) by the 1st of May 1999 in National Capital Region

(NCR) of Delhi. The 90s became the melting point for the car industry in India. New models

like Maruti’s Classic, Alto, Station Wagon, Ford’s Ikon and the new look Mitsubishi Lancer

were launched with an eye on the emerging market5.

Launch of Ford EcoSport in India


The gradual surge in the fuel prices has made the Indian car enthusiasts and other people see

an entirely fresh trend. The lucrative Indian car market that was out and out, bent more

towards hatchbacks and sedans to a certain extent, is now changing trends and falling towards

the UV (utility vehicle) segment. The reason for this shift is cited with the fact that besides,

offering decent space for your daily trips, the UVs are also useful for longer journeys, thereby

saving fuel7.The automobile manufacturers automatically started looking to enhance their

portfolios for the growing Indian market with their respective manufactured utility vehicles.

The American auto major, Ford is also not behind in this prevalent trend with the introduction

of Ford EcoSport, which was the most anticipated launch of the year. The SUV has taken an

18 month gestation period to get it Indianized, for the company was aggressively testing the

EcoSport in the country and the one that has been launched is almost 70% locally

manufactured8.

The advantage of localizing the EcoSport is that the pricing of the SUV can be set

aggressively. This SUV was first put on display for the public eye, at the 2012 Automobile

Expo held in Delhi, and unlike many other vehicles that go through the process of

developmental changes like the change avatars that is, from a larger than life visual on board,

to the notched down clay models, and then, to the more realistic production versions, the

charming Ford EcoSport seemed to have skipped the steps entailed in the ‘Change Avatar’

process and straightaway headed into the production line from the drawing board9. The US

auto major Ford, launched its much awaited compact sports utility vehicle (SUV), EcoSport

on 26th June, 2013 in India with a price tag of Rs. 5.59 Lakh (ex-showroom Delhi)10. The

model is available in the following variants:

Version 1- 1 litre petrol with Ecoboost technology at Rs.7.90 Lakh

Version 2- 1.5 litre petrol at Rs.5.59 Lakh

Version 3- 1.5 litre diesel at Rs.6.69 Lakh

Version 4- 1.5 litre petrol with automatic transmission at Rs.8.45 Lakh

Ford EcoSport has been developed specially to cater those customers who want a compact

SUV within a budget of 5-10 lakh rupees. It is the best looking Sport Utility Vehicle in its

segment. Ford EcoSport follows the Ford's latest design theme featuring huge front bumper

and peeled-back head lights with a sporty rear-end. Ford EcoSport is powered by the award

winning 1.0 litre EcoBoost engine, which is known for its excellent mileage and reliability.

Ford has clearly stated that EcoSport is a sub 4 meter car which means shorter than many of

the hatches. Give it a look and it’s hard to believe if it’s actually that short. The design of this

car is exceptional. The people at Auto Expo couldn’t believe if they are going to see this car

plying on Indian roads. “We have never seen a compact SUV as dazzling as EcoSport in

India. Turn once, twice, thrice around it and you just can’t stop wondering how unique this

car is.” There is no doubt that Ford has tried to bring all the SUV characteristics to this car.

This five seated SUV stands high and tall. It looks extremely aggressive from its front. It has

a massive front bumper sporting a huge three layered air dam. It’s partly black in color so that

it looks less bulky.

Ford India has invested $142 million at its Chennai plant to manufacture the EcoSport. The

Company is also investing an amount of 1 billion dollars to set up its second production

facility at Sanand in Gujarat and is expected to be operational by 2014. With these two plants,

the Company will have an output capacity of 2.4 Lakh vehicles and 2.7 Lakh engines

annually14. At the launch of the EcoSport, top Ford officials said that a multi-segment spread


was part of the EcoSport's marketing and positioning strategy. "The EcoSport is a unique

proposition and we have to keep in mind what the Indian customer wants in terms of both the

product features as well as the price positioning," said Ford India president & MD Joginder

Singh. "For us, it's a new segment and the pricing will help draw customers from a broad

range of products - sedans, hatchbacks, small SUVs and even those who already have a

bigger SUV and want to settle for a vehicle this size." At Rs 7.89 lakh for the higher end

petrol and Rs 8.44 lakh for the automatic transmission, the priciest EcoSport variants are

positioned alongside the Renault Duster's entry level models. Analysts say the EcoSport

could also redefine the compact SUV segment into a position that overlaps both the sedan as

well as the SUV. It could also trigger off a discount war in the marketplace as rival brands

offer fresh benefits to counter the pull of a newly launched vehicle. Although not too many

companies would have the stomach for an all-out price war at a time when the sentiment is

sluggish and the rupee is sliding sharply, discounts and added benefits would certainly be on

the rise as the auto industry drives into the festival season15.

Ford India has invested $142 million at its Chennai plant to manufacture the EcoSport. The

Company is also investing an amount of 1 billion dollars to set up its second production

facility at Sanand in Gujarat and is expected to be operational by 2014. With these two plants,

the Company will have an output capacity of 2.4 Lakh vehicles and 2.7 Lakh engines

annually14.

INDUSTRY ANALYSIS

Pestle Analysis –

In the United States, they've been dubbed the 'soccer moms'; in China they are the 'tiger

moms'. In India, you could call them — mothers ferrying their kids and groceries in rugged

sports utility vehicles (SUVs) — the 'M Class mass.' And they're doing their bit to contribute

to double-digit growth in Compact SUV segment even as sales in the overall passenger

vehicle market remain sluggish17. With urbanization reaching a point of saturation in major

cities, workplaces are shifting to the suburbs. Also, with population of working women

increasing, the sense of security, as mentioned by many users, is one of the major reasons for

this segment’s growth in recent times. The automobile market dynamics in India has changed

over the last couple of years. With all the major manufacturers setting up their plants in India,

the Indian automobile consumer is now rotten for choices. The typical “Mileage” mindset has

changed as consumers have also started demanding for “Performance and Safety”. With the

middle class growing, companies are aiming to tap the relatively strong demand for

affordable crossover vehicles, despite the doldrums the country's overall auto market has

suffered this year. Though sales of sport utility vehicles fell 17.5% in July 2013, the first

monthly slide in four years, the segment had been a rare bright spot in India's otherwise

gloomy auto market. The demand for smaller SUVs is expected to boom over the next few

years in emerging markets, with sales in the segment forecasted to grow from just 6,140

vehicles in 2012 to more than 126,000 in 2015 in India.18

With all the major manufacturers having their manufacturing setup in India, the technology

that was previously imported and hence, costlier, is available to the consumers at a far lesser

cost. From microprocessor controlled fuel injection to Bluetooth enabled audio systems to

connect your smart-phone, being the starters. With consumers becoming more aware about

terms like “torque, traction control etc”, the consumer touch-points have changed. The SUV

market in India is known for producing petrol guzzling monsters. But with oil prices on a


steady rise, any manufacturer coming with a SUV that performs at par with any competing

SUV, yet, providing the mileage of a hatchback is driving the SUV market.

The significant environmental implications of vehicles cannot be denied. The need to reduce

vehicular pollution has led to emission control through regulations in conjunction with

increasingly environment-friendly technologies. It was only in 1991 that the first stage

emission norms came into force for petrol vehicles and in 1992 for diesel vehicles. From

April 1995 mandatory fitment of catalytic converters in new petrol passenger cars sold in the

four metros of Delhi, Calcutta, Mumbai and Chennai along with supply of Unleaded Petrol

(ULP) was affected. Availability of ULP was further extended to 42 major cities and now it is

available throughout the country. Since India embarked on a formal emission control regime

only in 1991, there is a gap in comparison with technologies available in the USA or Europe.

Currently, we are behind Euro norms by few years, however, a beginning has been made, and

emission norms are being aligned with Euro standards and vehicular technology is being

accordingly upgraded. Vehicle manufactures are also working towards bridging the gap

between Euro standards and Indian emission norms. This has forced all manufacturers to

either build vehicles with more efficiency and lesser emissions or introduce hybrid cars,

which was tried by leading manufacturers like Toyota (Prius), Ford and Honda (Civic

Hybrid).19

FORD MOTOR COMPANY

Operates in automobile industry which is impacted by the GDP, Inflation, and

Unemployment rate. The industry is impacted by, and has an impact on the GDP, the

unemployment rate, the interest and the inflation rate. Back in 2003, Ford virtually created

the compact, front-wheel drive city SUV segment in Brazil, lobbing the new EcoSport into

the ring to compete with small utility models with rear-or all-wheel drive, like the Suzuki

Jimny and locally assembled Mitsubishi Pajero TR4 [Shogun Pinin in Europe], both heavier

models more off-road focused. Late last year, Renault launched the locally-built Duster,

which finally tipped the EcoSport off its segment leading perch. But, from launch on 31

December, chances are the redesigned EcoSport will reclaim Ford's crown.20 Factors like

Market prices, oil charges and costless business continue which access the customer to devote

on the automobile. Derived dominion adjustment and technological assistance among nations

helping the ford India in boosting the endowment and constructing the modern standards

which can encounter with the present outline. Commencement of new organization

constitution influences the ford to advance its standing orders which are essential for

assembling a valuable transport. One of the reason because of which ford was able to price its

cars so low was that it paid attention to the current Indian economic situation( constant rupee

fall and rising inflation) & adopted a strategy of manufacturing 70% of its car locally as a

result it was able to bargain on its price.21

The comparisons with other leading players proves the above motioned strategy was

beneficial: -

Ford EcoSport v/s Mahindra Quanto – People opting for the C6 or C8 variant of the Quanto

are very likely to opt for the base EcoSport diesel which comes in at a cheaper price. The

Quanto’s top variants are priced at Rs. 8.06 lakhs and 8.64 lakhs, while the diesel EcoSport

Ambiente is priced at Rs. 7.93 lakhs and the Trend variant is priced at Rs. 9.01 lakhs.


Ford EcoSport v/s Premier RiO – First mover advantage doesn’t necessarily work always.

Case in point is the RiO, which although the first compact SUV in India, is quite horrible

when it comes to dynamics and quality. The petrol engine on the RiO is below average and

the only saving grace is Fiat’s Multijet diesel engine in the RiO which is priced at Rs. 7.94

lakhs. The base EcoSport is Rs. 10000/- cheaper and much better in terms of quality and

dynamics.

Ford EcoSport v/s Maruti DZire – The DZire has had a dream run till now but the EcoSport

might spoil its party. The DZire ZXi costs Rs. 6000/- more than the 1.5-litre petrol EcoSport

Trend variant. The top-end DZire is priced at Rs. 9.03 lakhs, Rs. 2000/- more than the diesel

EcoSport Trend.

Ford EcoSport v/s Maruti Ertiga – The ZXi variant of the Ertiga is priced at Rs. 8.96 lakhs,

while the 1.5-litre petrol EcoSport Titanium is priced at Rs. 8.88 lakhs. The top-end diesel

Ertiga ZDi is priced at Rs. 10.64 lakhs while the top-end EcoSport Titanium (O) is priced at

Rs. 10.66 lakhs. We get way more features in the EcoSport, although the Ertiga offers you 7-

seats and there is a CNG option too.

Ford EcoSport v/s Renault Duster – Ford has created absolute havoc for Renault. The Duster

has been overpriced since day one and multiple price hikes have only made the overpriced

Duster even more overpriced. The base Duster is priced at Rs. 9.05 lakhs while the base

EcoSport is priced at Rs. 6.63 lakhs that is a difference of Rs. 2.42 lakhs. The base Duster

diesel is priced at Rs. 10.06 lakhs while the base EcoSport diesel comes in at Rs. 7.93 lakhs, a

difference of 2.13 lakhs! If we compare the top-end Duster 85 PS diesel (priced at Rs. 12.73

lakhs) with the top-end EcoSport diesel, we will see the price difference between them is Rs.

2.07 lakhs. Comparing the top-end EcoSport diesel with the top-end Duster 110 PS RxZ

(Opt) shows a whooping price difference of Rs. 3.49 lakhs. Yes, the top-end Duster costs Rs.

14.15 lakhs. Renault really needs a French revolution now.

Also Ford has not only been juggling with many models, but its products have always been

youth centric. Considering India where more than 50% of population is youth Ford EcoSport

paid a lot of attention on designing and giving it a menacing and jazzy urban youth look

which will surely attract Indian young population to this fuel efficient car hence the launch of

ford EcoSport in 5-7 lakh segment. To turn profitable, a (car) company needs to obtain a

minimum volume of a specific model. For models in the Rs 5-7.5 lakh range, a company

needs to sell at least 3,000 units a month to break even, and 6,000 units a month for products

in the Rs 3-5 lakh price range. And ford EcoSport had received 30000 bookings in the month

of its launch itself. It has always been high on introducing new and innovative technological

advancement in its models. The engine in EcoSport is an all-alloy, 'Sigma', 97.6 cu inch/1.6-

litre flex fuel unit developing 113bhp on 100% ethanol. That, along with new high-strength

steel in the bodywork, kept the average model-for-model weight rise down to 88lb/40kg

despite considerably more standard equipment. Ford claims better fuel efficiency with this

engine 6. Using the new Fiesta’s architecture also allowed Ford to specify safety-related

upgrades such as anti-lock brakes and driver and passenger air bags plus, in upscale versions,

side and curtain air bags and stability and traction control. Then EcoSport is also rendered

with ESP(electronic Brake Program), rear parking sensors, a hill start assist and added new

features like SYNC, which alerts the emergency service automatically in case of hazardous

situation etc. All these qualities make this car a perfect one for the customers of India and

definitely the most admired one in its segment. Basic versions are no longer offered by ford.

Visteon designed and is manufacturing key heating, ventilation and air conditioning (HVAC)

components for the Ford Ecosport launched recently in Brazil and destined for global sale.


Parts supplied by Visteon for the Ecosport include a compact, centre-mounted HVAC

system; compressor; condenser with integrated receiver dryer; and air conditioning lines with

'zero leak' metal seal fittings. The air conditioning system is among the first to apply a 45mm

'tube-fin' evaporator construction for maximum performance in transferring heat out of the

cabin.

Porter’s Five Force Analysis –

Michel Porter identified five forces that influence an industry [porters Five Forces model has

been explained in detail in Exhibit 8]. We will analyse the model from Ford’s perspective.

The first factor is ‘The degree of Rivalry’; India is majorly a hatchback and sedan market.

The SUV segment is comparably small. There a few existing competitors that have brand

names in this market who also compete in terms of the market and the pricing of the vehicle.

These are: Maruti Udyog Limited, Renault, Mahindra and Mahindra Automotive Industry,

Honda, Tata Motors, and Force Motors Ltd.

The next factor identified by porter is the ‘Threat of Substitute Products’. The Indian

consumer is price sensitive. Ford EcoSport is priced ad at Rs. 5.59 lakhs23 which makes it one

of the most reasonable compact SUVs. Its most notable competitors within similar price

range includes Renult Duster, Maruti Suzuki Ertiga, Maruti Suzuki Desire, Mahindra &

Mahindra Quanto, Honda Amaze, Premier Rio, Mahindra Thar, Tata Sumo, Mahindra

Bolero, and Chevrolet Enjoy.

Another factor that affects the industry is ‘Industry Rivalry’ or ‘Barriers to Entry’. Ford is an

already established brand in the automobile industry. With decades of experience therefore

while launching the EcoSport it will not have barriers such as a start-up company with

licensing but other effective barriers such as; The increasing oil prices, Demand in the

market, The already existing brands, Government policies in terms of emissions and other

specifications and the cost of manufacturing the product.

The last two factors identified in the five factor model are ‘Bargaining Power of Buyers and

suppliers’, Bargaining power of the supplier indicates how strong is the position of a seller

and bargaining power of buyers means, how much control the buyers have to drive down

your products price, Can they work together in ordering large volumes. How much your

supplier has control over increasing the Price of supplies? In the relationship between the

automotive industry and its supplier, the power lies mostly in the hands of the industry

manufacturer. The giants such as ford are able to dictate their terms to their suppliers. About

70% of the components of ford EcoSport are made in India itself.

In the relationship between the company and the buyers, the later has an upper hand as the

market is very competitive and there are a lot of choices available as mentioned above. But

then there is a huge market to tap and the SUV market has just started to see growth and the

people are patient enough to wait for a order to delivery period of almost 6 to 9 months24.

Red Ocean and Blue Ocean Strategy

Blue Ocean Strategy assists us during strategic planning. It enables us to concentrate on the

creation of new markets via new offerings, with the aim being to make the competition

http://www.carwale.com/chevrolet-cars/enjoy/


irrelevant so that an organization can grow. Such a strategy therefore allows firms to largely

play a non–zero-sum game, with high payoff possibilities.

The Ford Ecosport is quite simply the most important product for the American car maker in

India due to two factors26:

1) Ford needs a best-selling product to take the place of the Figo, which is becoming a dated

offering26.

2) The SUV segment is one of the outliers in the Indian car market, showing high growth at a

time when car sales in India are going towards slowdown. So, the EcoSport does have a lot

riding on it. In a price sensitive market such as India, a sharply priced car has all the trappings

of becoming a success right from the word go. And Ford India’s intent to price the EcoSport

competitively have been evident for quite a while now26.

Ford, before the EcoSport, was selling only one SUV in India, the Endeavor. But the

EcoSport could make the difference. It is launching in India on the back of strong demand

shift towards the SUVs. Sales have somewhat slowed in the last couple of months, especially

due to the additional 3 percent excise duty imposed on SUVs in the Union Budget.

Red Oceans Strategy, already contain a number of competitors. A Red Ocean Strategy is a

strategy which is aims to fight and beat the competition. They focus on competing in a

marketplace which already exists. They focus on beating the competition.

While localization is one strategy, the other strategy that Ford could adopt in order to price

the EcoSport competitively is that of betting big on volumes. Ford is said to planning to build

no less than 150,000 EcoSport’s in India. The huge volumes, at least by Ford India’s

standards, backed by high localization of parts, are expected to give the car maker better

negotiating ability with vendors supplying parts for the EcoSport. These factors, along with

the excise duty benefit the EcoSport stands to get from the Indian government due to the car’s

sub-4 meter length, is expected to be instrumental in allowing Ford to achieve the sub-6 lakh

rupee price tag for the entry level variant.

The EcoSport at a sub-6 lakh rupee price tag is something that is quite apt for the car. The

Eco Sport’s compact dimensions mean that car buyers will tend to compare the EcoSport

with B+ segment hatchbacks and entry level compact SUVs such as the Premier Rio and the

Mahindra Quanto. So, a sub 6 lakh rupee price tag seems just what the doctor ordered for

Ford to achieve big numbers for the crossover27.

Financial Analysis of Ford India Private Limited

Financially Ford Ecosport is helping Ford a lot to recover the losses which occurred in past.

Here is some of the financial analysis of Ford India Private Limited before and after the

launch of EcoSport.

When we look at past trend of sales of ford India, compounded annual growth rate of 34% is

shown in sales and if we look at expenses they are contributing around 96% of sales, which is

affecting the net profit. From last 5 years company net profit is negative, in order to improve

this company is planning for new models and extension of capacity for future. Company is

coming with new plant is sanand and 8 new models in a decade which will help company in

increasing market share and making new profits.


If we look at growth of automobile sector, sector is growing with average of 14%, so we can

make analysis that company is going to show constant growth of 14% in future.

Year 2008 2009 2010 2011 2012

Net Sales1 2,068.89 1,754.32 2,144.38 5,636.50 6,604.18

Sales trend 7.63 7.47 7.67 8.64 8.80

Slope 0.34885631

Expenses1 2,366.62 2,119.18 2,547.23 5,428.89 6,399.93

Profit1 -37.44 -76.80 -209.31 -107.50 -140.03

If we look at July 2013 figures, facts and news of ford, company is showing positive results

with new model of ford Ecosport.

Ford India reported 48.23 per cent increase in total sales in July this year at 12,338 units on

the back of newly launched compact sports utility vehicle EcoSport3. The Company had sold

a total of 8,323 units in the same month last year, Ford India said in a statement. Domestic

sales also went up by 26.15 per cent to 7,867 units in July this year as against 6,236 units in

the same month last year, it added. The company exported 4,471 units last month compared

to 2,087 units in the year-ago period, a jump of over two-fold.

The sales of Ford India including exports stood at 11,065 units in August 2013 registering 7%

growth in comparison with August 2012 sales of 10,352 units. The domestic sales accounts

for 8,008 units in August this year, compared to 7,840 units in August last year, recording a 2

per cent increase. Exports for the month of August 2013 stood at 3,057 cars against 2,512

units in August 2012; recording a growth of 22 percent.

2

A significant customer interest in the recently launched urban SUV, the all-new EcoSport,

helped add up to Ford India’s second-best sales month so far this year.

The year-to-date sales of Ford India in the fiscal year 2013-14 along with exports stood at

45,437 units against 43,264 units during same period of previous financial year, registering

5% increase. The domestic sales for the period is 8% less for the April-August period in FY

2013-14 at 31,025 units as against 33,580 units during the April-August period of FY 2012-

13. The exports went significantly high for the period at 49% at 14,412 units against 9,684

units during same period of FY 2012-13.29


Ratios

A financial ratio is a relative magnitude of two selected numerical values taken from an

enterprise's financial statements.

The current ratio32 is balance-sheet financial performance measure of company liquidity.

Low values for the current ratio (values less than 1) indicating that a firm is facing difficulty

meeting current obligations.

Year 2008 2009 2010 2011 2012

Current Ratio 0.92 0.84 1 0.97 0.83

Turnover Ratios

Inventory 8.7 9.52 5.4 5.66 7.36

Debtors 31.17 26.35 9.47 7.52 9.07

Turnover ratios are also known as activity or efficiency ratios. The total fund raised by the

company is invested in acquiring various assets for its operations. The assets are acquired to

generate the sales revenue and the position of profit depends upon the value of sales.

Turnover ratios establish the relationship of sales with various assets.

Inventory turnover ratio31 measures how frequently the company's inventory turned into

sales. If we look at figures in 2012 it is better in compared to 2011.

Debtor’s turnover ratio31 shows how quickly the credit sales of the company have been

converted into cash. If we look at figures it is decreasing every year which is directly

affecting profitability of company. Lower debtor turnover ratio is not good because it tells us

that we have not managed debtor’s better ways. Money from debtors is not collected fastly.

This is will create bad impact if some investors planning to invest.

Beyond this after looking at future aspects we also forecasted according to industry and

company growth. After the new plans company is showing positive sign, which shows

company is trying to implement strategies.

Strategic moves by Ford EcoSport (Positives and Negatives)

Positive factors for Ford EcoSport

Low Cost of Ownership and Low Pricing Strategy – Ford EcoSport will be

supported by a well thought out strategy of robust and well tested components and

spares and faster, affordable and timely service. Innovative “Child Parts” strategy and

low pricing specially developed durable parts plus technologically advanced

powertrains contribute to low price of Ford EcoSport and low cost of ownership.

Ford’s main vision behind launching EcoSport with this strategy is because they want

to provide a low cost of ownership and service over time. To offer this, Ford worked

hard on a three-pronged vision of efficient technology and parts design, service

innovations and network expansions33.


Three class-leading powertrains, including the internationally acclaimed EcoBoost,

powers the Ecosport range in India offering amazing and superior fuel-efficiency and

thus a low running cost over the ownership lifecycle. Being produced on a global

platform, the all new EcoSport benefits from the huge economies of scale in terms of

global sourcing that benefits the customers. Since mostly all service parts are

produced locally, the availability and affordability of parts has greatly increased.

“Child Parts” strategy comes from the production of Ford Figo, which means not

replacing of entire assemblies. For example, the front bumper comes in three separate

child parts allowing cheaper replacements33.

Providing easy and quick service for the EcoSport also has been addressed with more

dealership adding quick service bays and Ford-pioneered “Quick Lane” service that

takes customer experience to the next level in terms of comfort and convenience.

With 260 outlets in around 138 cities and towns in India, Ford EcoSport is fully

geared up to need the service needs of customers. Ford’s mobile vans also available at

around 20 locations33.

Ford Ecosport is a compact SUV with aggressive price range from 5.59 lakhs to 7.8

lakhs (depending upon the variant). Ford is mainly banking on high volumes as they

are more concentrated towards volumes rather than profit margin to increase their

market share in India. For lowering the cost Ford strategies as invested around 142

million USD. They settled a complete manufacturing unit dedicated to this car only

in Chennai. We have to look more into how they are managing this much low cost

and how this will affect the overall sales of Ford cars and particularly Ecosport in

India.

High Demand of Ford EcoSport – Ford EcoSport becomes the highest selling SUV

in last quarter. Ford was swamped by as many as 30,000 bookings in the fortnight the

launch of Ecosport in India on 25 June, potential buyers lured by its price, size and

looks. Since the launch of EcoSport in India, Ford India is experiencing a significant

rise in footfalls at dealerships across all regions and most dealerships across all

regions and most dealerships are witnessing record levels of daily bookings, with

enquiries extending to other Ford nameplates as well. Out of the 260 dealer touch in

360 cities, 40% cover tier II and III, and these have been in readiness for this

overwhelming demand for the EcoSport. According to SIAM, the company has sold

8717 units of EcoSport till July, and 4,715 units in July itself34, 35.

Because of heavy demand booking for some variants are now stopped which is

effecting the buying of potential customers. Since Ford EcoSport is most selling SUV

in India right now and due to this amazing response, buyers have turned up in huge

numbers to book themselves a ride in this SUV. Over a period of time, the demand

exceeded considerably and eventual outnumbered the supply. This led to increased

waiting period of SUV’s delivery. This high demand and high bookings helped Ford

Indian on financially sector to a high extent (Refer to financial analysis). Low price,

good in style, plenty of features make Ford Ecosport as 1st choice of customer who are

preferring high-end Hatchbacks and entry level SUVs. Because of these feature, Ford

Ecosport right now enjoying 30,000 pre-bookings in just 17 days of launch. For some

models waiting time is extended to 180 to 270 days with minimum waiting time of 60

days on few other high-end models. Petrol variants are offering high waiting because

Ford is more concentrating on Diesel models as they are having high demand rather


than petrol variants. We have to decide or made any conclusion on this as on what

Ford need to concentrate more – Concentrate on diesel models as their sales are more

or concentrate on high production of petrol variants as their waiting is continuously

increasing36.

Segment Advantage – EcoSport’s design is new for Indian customer with that price

and no doubt its best in class. EcoSport’s segment is also new to the Indian market as

it is launched under compact SUV segment in which only one car i.e. Renault Duster

was present but the prices are about 20% more than that of EcoSport. EcoSport also

gives choice in type of Engine along with variant which is also 1st time in India with

around 4 engines distributed in 10 different variants. It is providing you the pleasure

of SUV along with easy city rides because of compact size and handling. One of the

biggest reason behind so many advantages is the mapping of car, which is nearly

perfect for Indians and Indian roads.

Along with practical advantages related to driving status, Ford and customers also

enjoying financial advantages on this car. This car comes under 4 meter segment with

higher ground clearance, hence the excise duty reduced to 4% for customers and 1%

for company and similarly on the spare parts as well. Tax relaxation from government

is also coming for company as well as customer because of size pattern which is

adopted by Ford EcoSport.

Negative factors for Ford EcoSport –

Long Waiting time – Lured by its price, size and looks, Ford Ecosport received as

many as 30,000 bookings in a fortnight. The production centers of Ford are clearly not

in a position to handle so much demand. There is waiting period of about 90-270 days

on some models. If it fails to boost production to meet the demand for the EcoSport,

Ford India Pvt. Ltd. risks losing customers to not only rivals such as Renault SA, with

its Duster SUV, but also Maruti Suzuki India Ltd, which plans to start selling its

compact SUV XA Alpha next year. Also why should a customer prefer the same car

after 6-9 months when there is chance a new design, new modifications, new features

and new product at same price at that time? Also for pre-booking of Ford Ecosport

customer need to pay around Rs. 80,000. If we calculate compound interest of this

money for next 9 months @ 10% rate then also customer is losing some money to buy

this car and hence costing of the car will automatically increase37.

Recall by Ford Ecosport – Ford recalled 972 of the diesel powered Ford Ecosport,

barely days after its launch, because of some serious technical issues which could

have impact on customer safety. The recall came at a time when bookings for the

model have swelled and deliveries had begun. This can dent the customer sentiments,

particularly of those customers whose cars are recalled & their money is somewhere

in between without the car and to those who are planning to buy the car in future. It


will also generate a doubt in the minds of those customers who have purchased the car

and are not recalled. The company issued a quick notice saying "This is a proactive,

voluntary recall action to ensure customers' safety and satisfaction." Now it can be

taken as a strategic move by company as they want to prove “Yes we take care off

any problem with our product and we will not ignore them”. We have to analyze “Is

this recall a strategic move by Ford to attract more customers. And if it is so, then

how will this affect the sale of Ford Ecosport38?”

Compromise on plastics quality for price--Major chunk of the plastics used in

building the car are hard plastics and are inferior to most premium vehicle, for

example, the Hundai i20. This is not a car for which the owners would be raving

about on quality. The real issues however observed are loosely fitted plastic panels

around the gear lever and meter console which could easily shake the entire

instrument console by hand. On a related note, the same problem was observed with

the fog lamp housing on the bumper39.

Conclusion

Ford’s strategies to launch EcoSport for Indian market seems to be worked excellently for

them as per the current figure of the sales. The strategies like “Child Parts strategy”, low cost

of ownership, low pricing strategy, differential segment etc. makes Ford EcoSport most

demanded car in India during past 4 months period. As Indian customer is very reluctant in

buying items like automobile, long waiting time of about 9 months may cause loosing of

potential customer because after 9 months many new cars of same segments will come to tap

the market in which EcoSport is playing the game. On the contrary of this long waiting time,

recent recall by Ford of some of its diesel cars can make situation worst for EcoSport. Is

recalls made by Ford right at this peak time of sales performance or is that a strategic move

by Ford to put EcoSport in news again and again. Even after so much of positive attributes at

that low cost what makes Ford’s customer wait for long time and dishearten the customers by

recalls. As many of the competitors already planned to put atleast one car in EcoSport’s

segment in upcoming 2 or 3 months, it will be very interesting to see how Ford will react on

that and how they will hide the big problems of not using good quality external material,

recalls and maintain the customers who have to wait for next 9 months for their own Ford

EcoSport.


Exhibits

Exhibit 1 – Market Shares of Various Automotive Companies in India (4 Wheeler)

Exhibit 2 – Automotive Clusters in India.


Exhibit 3 – Market share with reference to parent companies globally and locally.

Exhibit 4 – Passenger vehicle production in India according to ACMA.


Exhibit 5 – Features of different models of Ford EcoSport.

Exhibit 6 – Comparative Chart of EcoSport with other SUV’s.


Exhibit 7 – PESTEL Framework.

Exhibit 8 – Porter’s five force model.


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case study report ford ecosport

Documents

manufacturing of ford

indian automobile industry

indian auto industry

launched ecosport

fords ecosport

indian customer

ford india private limited

debts of indian market