Ford, GM fail to crack India code

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Detroit automakers’ combined market share stands at a poor 6.5% and is shrinking

Almost two decades after entering India, here’s what General Motors and Ford Motor have to show for their efforts in Asia’s third-largest automobile market: combined market share of about 6.5 per cent and falling.

GM’s sales in the country have tumbled 17 per cent in the past 10 months and Ford’s deliveries are off 8.4 per cent, according to researcher Intelligence Automotive Asia. Though the US carmakers say they’re optimistic, they face mounting competition from Toyota Motor and market leader Maruti Suzuki, which makes four in 10 vehicles sold in India.

The wrong cars priced above rivals’ offerings, coupled with poor service, are among the reasons analysts cite for the Americans’ lack of progress in a country that’s projected to overtake Japan as the world’s No. 3 passenger-vehicle market this decade. While they are stepping up efforts to cater to Indian motorists, the Detroit automakers have yet to show they can reverse their slide toward irrelevance.

“GM and Ford have not been able to understand the market,” said Deepesh Rathore, a managing director for researcher IHS Automotive in New Delhi. “They haven’t been able to train their dealers and the competition is getting tougher.”

When Ford introduced its latest Fiesta sedan in India in July 2011, it priced the car at Rs 8,23,000 ($15,120), or almost 20 per cent higher than Hyundai Motor’s similarly sized Verna. The Verna has outsold the Fiesta four-to-one.

GM entered India in 1994 in a venture with Hindustan Motors, selling the Opel Astra and later the Corsa and Vectra — all three sedans, in a country where most buyers prefer hatchbacks. GM bought out Hindustan Motors’ stake in the venture in 1999.

The company’s first hatchback in India, the Opel Corsa Sail, didn’t hit the market until 2003. And at Rs 4,39,000, it was 25 per cent more expensive than the comparable Fiat Palio and Maruti Zen. GM discontinued the model three years later, saying it wasn’t competitive. GM now has a market share of about 3.3 per cent.

Ford was the fourth-lowest scoring brand and GM was third-lowest in the J D Power & Associates’s 2012 India Customer Service Index study, which ranks dealerships and service centres, released October 31. Maruti ranked first, followed by Honda Motor and Hyundai.

The Americans also lag behind in their dealer networks. GM has 279 dealers in India and Ford has 160, versus 1,100 at Maruti Suzuki and 355 at Hyundai. Recruiting more dealers may be a challenge.

“It’s a chicken and egg situation,” said Mohit Arora, an executive director at J D Power in Singapore. “If you don’t have the volumes or model lineup, you end up attracting sub-optimal dealers.”

Sometimes it’s the little things. To save on costs, power windows were only offered in the front seats when Ford introduced its Escort sedan in 1997. Buyers with enough cash to afford the car, though, typically have drivers, so they were in the back with wind-up windows while the chauffeur had power up front. The problem has since been fixed. In GM’s Chevrolet Optra and Aveo, drivers seeking to signal a turn by flicking the lever on the right, as is typical in India, would instead activate the wipers.

Today, GM is looking for inspiration in China, where it has been the No. 1 foreign automaker every year since 2005. GM last week began taking orders in India for the Chevrolet Sail, the second-most popular vehicle in China. This year, the automaker also plans to introduce the Chevrolet Enjoy, a version of a top-selling Chinese minivan called Wuling Hong Guang.

Lowell Paddock, president of GM’s India unit, said his company’s underperformance in the country has been due to shifts in market demand, particularly a growing preference for diesel engines as gasoline prices have surged.

“Success here requires a mix of an appropriate product together with expected levels of Indianisation and localisation,” Paddock said in an email. “Some of our previous models, lacking diesel options, were limited.”

With the help of cars such as the Sail, introduced in New Delhi last week at Rs 4,44,000, GM aims to increase its market share to at least 10 per cent over the next five years, Paddock said. The Sail hatchback, which comes with a diesel option, will offer an industry-high five-year warranty on the engine and transmission, the company said November 2.

Ford has had substantial success with the Figo, a hatchback introduced in 2010. The car today accounts for almost 80 per cent of Ford’s India sales. Without it, the company’s market share would be below one per cent versus 3.2 per cent now.

The company aims to double its Indian sales and service outlets to more than 500 by 2015, Michael Boneham, Ford’s India president said in Mumbai while unveiling a revamped Figo on October 15.


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