This week IndiaAutoReport (IAR) did something different. We got up from behind our computers, picked up the Dictaphone, and decided to throw some honest questions at a senior automotive executive.
IAR’s commitment to the automotive industry is to add value through mature analysis and thought provoking insights. Often the analysis is uncomfortable for management as it brings out aspects that communication departments would prefer to hide. To ensure that our point-of-view is balanced, we have decided to seek the views of senior managers.
Starting this week, IAR will run a series of interviews with senior managers, mostly heads of OEMs or sales / marketing leaders at OEMs. We start the series of interviews with Vinay Piparsania, Executive Director, Marketing, Sales & Service at Ford India.
We met Vinay at the Ford India offices in Gurgaon for a one-hour recorded interview. During the conversation we asked him about Ford’s future plans, the Figo’s numbers, EcoSport’s success, and the Endeavour’s volumes. At times we were too
nosey inquisitive and he sidestepped those questions gracefully.
PS: This is not a continuous interview series. We are in the process of seeking appointments with some other senior executives. With the kind of reputation we carry, it is not surprising that most of them have not shown too much eagerness in accommodating us in their busy schedules. Some of them, admittedly, are also busy playing musical chairs. We keep on trying and the next interview should be published in a few weeks.
For now, presenting the conversation with Vinay Piparsania.
What are the biggest challenges that you face today?
The Indian market over the past few years has witnessed a sharp slowdown. It’s always a wait and watch in such a scenario. The new Government, however, has presented a progressive roadmap for the Indian economy. It’s very evident that the auto Industry is being looked upon as a driver for economic growth. The extension of excise benefits, along with revised tax structures announced in the budget, have already started helping strengthen consumer sentiment across all sectors, including Auto. The decisions in the past few months reflect the government’s recognition of the importance of the manufacturing sector and its contribution to overall economic growth. We are quite optimistic that the government will continue its pro-consumer reforms to aid economic growth. Such decisions have brought about a lot more certainty from at least a planning perspective.
The positive sentiment should support growth and recovery of the automotive market in the country.
You mentioned the slowdown and it has been affecting everyone. So if we consider segment specific slowdown, the Figo has been facing a major slowdown in sales. When we look at the recent monthly data, and even prior to that, you have been seeing a 40-50% decline y-o-y and comparing it from two years back, it’s about a 70% overall decline. That is faster than the segment decline. Is it because of the age of the model or maybe because the energy was being focused on the EcoSport, which has been doing extremely well? What led to this sudden decline?
I think entry-level cars have seen an overall decline. But within that, there’s a demand for products that people are more familiar with. The Ford Figo has always been a car for those who want something different from what they’ve had earlier. Figo continues to appeal to such customers and that’s how we have kept the product steady.
Year-over-year, there is a natural decline that does take place, but there are ways to keep a product in the consideration set by continuously improving the product based on customer requirements.
We launched an upgraded Figo in 2012 with enhanced exteriors and added convenience features. This year we made the Figo smarter with bright interiors as well as a Wi-Fi pack that allows the car’s occupants to stay connected with the world even on the go. As we go forward, we will continue to offer several –new intuitive features in the product that customer want.
The competitive arena has been expanding and the customers are drawn to new products; that’s evident from the segment we created with the EcoSport. I think we have been trying to make sure that our customers stay with us – that has been the focus of our brand communication – and we give them more choices in the form of the EcoSport..
In 2012, I think till around Aug-Sep, you were doing about 6300 units of the Figo per month. June 2013 is when the EcoSport came in even though the Figo had started declining even before that. The decline just accelerated after that. Right now cumulatively you are doing roughly the same no of units Figo & EcoSport combined as you were doing with the Figo alone. So do you the think the EcoSport has sort of cannibalized the Figo customer? Would you have preferred slightly less sort of movement happening?
We would have loved to have more numbers. I think the challenge that is coming to us is that for different segment customers, their sensitivities are extremely varied depending on the profile. The EcoSport has created a whole new segment. I think it’s a segment, which is very promising as is evident from the success of our urban SUV. It’s the kind of product that most Indian customers wanted.
Figo’s customers have a different profile; those who bought or are buying the Figo aren’t just looking for an entry level car but one that delivers more – for their money, features and practicality that enable their lifestyle. That’s how we positioned it.
The whole small car segment has witnessed a drop and Figo’s sales have also suffered due to this slowdown in the segment.. At the same time, competition has also increased multifold in the segment with several new launches and aggressive promotions by our peers. We have continuously upgraded the Figo based on market needs as customers are generally drawn towards newer product offerings. We wanted to maintain the Figo’s competitive position, which we’ve done.
You mentioned aggressive action being taken by others, do you refer to discounting by others?
Aggressive promotional activities have become a norm to draw more customers to your showrooms. Auto industry has been offering various kinds of promotions that vary across the country to suit a diverse customer base. We also did promotions to an extent; at the same time we have been expanding our network and our offerings, going deeper and deeper into tier-2 & tier-3 markets.
We’ve also been expanding our service capacity as our customers expect more convenience wherever they are based. Being closer to them is important and it’s a long-term thing. We don’t look at it as a short term; we look at it as part of a long-term journey. We have to go closer to our customers to support them and that’s what we have been doing.
So how big is the Ford network right now as far as sales & service centers are concerned?
We are now at 304 sales and service outlets across 164 locations in the country. In February this year, we had inaugurated 52 new locations in a single day, that’s how quickly we have been expanding. These included some workshops with a new concept called Quick Lanes. It is a concept in which we have – in very convenient locations – offered a facility where you can come without an appointment and get jobs like brakes, battery replacements, tyres etc., all done in an extremely quick and convenient turnaround time..
We piloted the Quick Lane concept from Bangalore last year and now have four such centers including those in Surat, Kochi and Nasik. While our focus is on volumes, we are also ensuring that our existing customers get the best maintenance for their vehicles through such initiatives.
We are working on a long-term vision of being as close to our customers as possible through such an expansion.. All this is being done to be ready for the growth that we know will eventually come.
Okay leaving the Figo & the EcoSport examples aside, just trying to understand the industry you say you have 304 touch points while someone like Maruti would have much more. So if I look at from an outsider’s perspective, does more number of touch points insulate you against the slowdown more effectively as compared to when you have a very limited number of touch points? Does (a larger number) work favorably?
These are two things – it is like laying the tracks as you spread your distribution network. We are planning for growth in terms of capacity and in terms of our production, as you know we have Chennai and now the Sanand plant is coming up.
To make sure that we are close to the customers we can’t create a structure overnight. We have to get started within a certain timeline, plan ahead as the capacity gets ready and gear up for future product launches. This is the time when we are investing for the future.
Our efforts are aligned to provide a superior customer experience and to do that, capacity needs to be created at every point – overall capacity, service capacity, also the capability of our team members, their competency, skills and training. We need to create warehouses for spare parts which are located closer to where the dealerships are so that we can reduce the time required for both parts availability as well as the overall stock requirements by dealership..
We know that there is a new generation Figo being readied for the Indian market. However, it will come in a few quarters time. Does that mean that you would be doing another facelift with the current generation or will it go out in the same shape?
I won’t be able to comment on that. (Since the interview, Ford has launched a refreshed Figo with minor facelift)
Our approach is to monitor every segment very carefully and keep our product offerings competitive. We do that through a number of options. It could be promotional; it could be product actions, it could be a whole new product eventually. So we will use everything that’s in our toolkit to ensure that we maintain a fair share for ourselves.
Honda & Hyundai & maybe some other manufacturers are actually implementing shorter lifecycle for products. From traditional seven years they have shortened it down to five years now and Hyundai now wants to now actually go down to four-year lifecycle, which would be the same platform with extensive freshening of the body so you end up calling it a new generation model. In that sense how does Ford plans to react to such things?
Every auto manufacture has different strategies and product cycle planning. We have our own and I wouldn’t like to comment on theirs. In our case, we are clearly working on a product led transformational growth that’s coming from our One Ford plan. We’ve seen the results of that- we’ve seen the EcoSport, then the new 2014 Ford Fiesta, which we launched earlier this year.
The EcoSport is a great One Ford product, which is now being exported to other markets. We’ve already seen the Figo concept that promises to be a great product when it’s ready. Our product led transformation is very much on track and that’s the only thing I can comment on.
So when the EcoSport was launched in June 2013 you started with about 4000 units a month, there were three months where you crossed 5000 units & then exports started and monthly dispatches came down to 4000 units. Last month (June 2014), you again went back to about 5000 units in domestic dispatches. Were there some production constraints that you were experiencing because of export volumes?
The domestic demand for EcoSport has remained quite overwhelming and we were very pleased with that.
In recent months, we are pleased to say, we have been able to break a number of bottlenecks and are going to be offering more volumes as we get into the second half of the year. Ford India has worked diligently with its suppliers to optimize efficiencies and we have significantly reduced the waiting period for most variants of the Ford EcoSport. Setting yet another benchmark of success, Ford EcoSport also celebrated the 100,000 sales milestone in domestic wholesales and exports combined recently. With improved availability, we are also planning to introduce a third shift at our Chennai plant to ensure that the Ford EcoSport is available across our showrooms, ahead of the upcoming festive season.
You have hit a sweet spot with the B platform with the EcoSport doing extensively well & you’ve got new generation products coming up within the same segment. What about other body-styles where the competitors are getting into – seven-seater MPVs? Are you thinking of getting into that?
We do believe that the B segment is very much the sweet spot for the Indian customer and we see it doubling even by the end of the decade. Clearly there are different (bodystyles) variations and a lot of manufacturers have shown that. These are segments that are obviously showing growth in the marketplace. We are monitoring the product offerings and growth of each of these segments very closely but I have nothing to add beyond this.
Are you willing to dip below the B segment or just stay where you are.
Again I won’t comment. But we’ve said before also, the B segment is where we see a high growth and where we already have a number of our products being offered. The New Figo Concept is aimed at that. We clearly want to demonstrate to our customers that they can expect a lot more. It’s not just about size, you can get great styling, you can get great smart features, all in packages that are very much at heart of this growth segment. So we’ll continue to look at offering that.
The Figo was an interesting product because it was the first time that Ford had taken, what people would call an old generation platform, re-skinned it to Indian requirements, ended up offering a hatchback which was great value for money. At the same time, many manufacturers like Hyundai have now shifted to have overlapping lifecycles of platforms. Do you think you would like to go down that path & have overlapping lifecycles?
Developing new platforms is cost intensive and can’t be sustained with just a single product. However, I think it’s no longer about platforms; it’s really about how we can leverage the engineering that we have already got in our products. And make sure that those strengths come through as the DNA of the car.
In the One Ford products, a very consistent dynamic design comes through. You get some key features; you like being very enabled, for e.g. SYNC, being offered on our Fiesta, EcoSport. These technologies and features are becoming clearly the Ford DNA.
So there are various ways you can do things; it doesn’t necessarily have to be platform, but clearly you would take advantage of technologies that you have evolved and take it across products, and broad base it over the product range to be what the Ford brand stands for.
So we will use our product strengths but not necessarily just platforms.
Is that the reason Ford likes calling them Architecture and not Platform?
That is correct, so that is how we would like to describe it.
You are building a huge capacity in Sanand; how much of that is going to be marked for exports? Are you going to build separate models in Sanand & Chennai, or are same models being shared at both plants?
I won’t be able to comment on the specifics right now. But we’ve been very public about the overall capacity, it’s both not just for manufacturing vehicles, but also engine plant for both domestic and export consumption.
This is clearly the confidence we have for the overall Asia-Pacific group; this is a region we are focused on and are building the footprint for growth moving forward. Almost 50% growth for Ford company overall is expected to come from the Asia Pacific region. And in India, volumes are growing. Seven million units (for the entire industry) by the end of the decade is our estimate.
But the plants have been designed with the ability and flexibility to be able to ramp up quickly, and mix and match models. There’s a lot of flexibility that has been built in to support the kind of mix & volumes, and model lineup we will offer; so that way, it is a truly global Ford manufacturing process that’s getting established.
How has the response to Ecoboost in the Indian market?
It’s been quite strong
What share of sales?
I won’t comment on that. But the idea of a small displacement engine offering performance, which is very much like a bigger engine and offering higher fuel efficiency, is beginning to resonate with Indian customers.
What’s happening to the Endeavour?
We launched the 2014 Ford Endeavour this year. The model has remained very steady. This great Ford product has been appreciated for its performance, rugged styling and true blue SUV credentials. This time we’ve had some more design changes, sleeker front end, tuned suspension and some more attributes.
You’ve seen news of other SUV concept vehicles from our One Ford product portfolio. Those are executions indicative of future trends, which Endeavour will have. That’s all about all I can share right now, we’ve just launched the 2014 model earlier this year.
What we meant to say is that throughout 2013-14 the dispatch volumes have been quite low, I am not even comparing to any other SUVs, but even standalone, the volumes are quite low.
When the Endeavour was first initially launched it helped expand a much smaller segment. Now the segment has expanded significantly, you’ve got many models. However, Endeavour has always been for customers who are looking for a true blue SUV & the numbers are reflective of that demand. The production and dispatches are reflective of the demand from these enthusiasts.
From December 2012 I just see a very sharp decline; you were doing roughly 200, now you are down to less than 50.
We source kits to assemble Endeavours from our plant in Thailand and there were a few supplier issues in that market. We also had the floods over there, which severely impacted supplies. And even after that, whatever has been the demand pattern, we’ve just been holding onto that.
Ford now has the confidence that we will eventually grow very big. Traditionally, what happens is that carmakers that come into the country, their policy is dictated by the HQ. That happens with every carmaker that stepped in India – Volkswagen is currently facing that, Honda was facing that till a few years back. It’s only after you achieve the first successes that the Indian operations start stressing a little more on their requirements for the Indian market. I sort of see it as a curve, where do you see yourself right now
India has always been a very strong aspect of the growth story for Ford and you’ve seen that in the overall planning and engagement, with all the leadership, the number of times they have come over to India. Alan Mullaly came to India; we had Mark Fields, who is now the new CEO, here. Very clearly, this is because of the Indian growth story and the complete commitment to it. Sanand as a plant was a decision done in 2011 and the idea of the Indian growth story, with the number of products we would like to launch, the expansion we are doing, in our people, in our services, is all a commitment to that. So it’s not just about ups and downs.
A couple of product successes builds the confidence at the Global HQ – in India, in the Indian market and also in the capabilities of the Indian Team running the show. We’ve seen it happening with Honda – two product successes and they started talking about “Let’s do an A-segment car.” They are in their Confidence Zone right now where they would be willing to experiment. At this time, it appears that you are in the Comfort zone of Ford Global; you are selling B-segment products, which are exactly the same as products sold globally and part of the One Ford programme. Would Ford step out of the Comfort zone in India to grow & say let’s do an India specific product? A kind of, let’s dip lower than what we’ve done?
Our One Ford plan is a consistent blueprint that continues to guide us globally. This is the plan that helped Ford Motor Company avert a crippling situation a few years ago and continues to work for us as we move forward. It continues to guide us with a vision of how we are moving forward in our product planning & our growth activities. That’s still the guiding principle. That is what we are living up to in all the markets around the world.
Two Major Problems Ford India Faces
While the EcoSport is a qualified success, Ford India currently faces two major problems – Figo and Endeavour. The Figo is the easier of the two. The car did well in its heydays and the current sales downturn is just old age catching up. The downturn in the industry just made matters worse for the Figo.The Figo’s sales downtrend started in the festive season of 2012. Post October 2012, sales dipped significantly and have never recovered since. Age has been a factor, though the market has since seen the launch of the Grand i10, i20 Elite, and the Celerio, three almost direct rivals to the Figo. Not to mention, there has been the Amaze, Ford’s own EcoSport and the Duster / Terrano twins, all of which have taken away chunks from the Figo’s customer base. This can be witnessed in the accelerated downturn in sales since the EcoSport hit the showrooms in June 2013.
To its credit, Ford hasn’t shown much desperation and given massive discounts on the Figo. While this may be bad for sales in the short-term, especially in the face of a downturn, it is good for the overall brand and would work wonders when the next gen Figo hits the market sometime in 2015.Talking of the next-gen; that should be the magic bullet, which would solve the Figo problem for Ford.The Figo Concept, an early curtain raiser of the next-gen Figo displayed at Auto Expo 2014 displayed sharp styling and oodles of oomph, factors, which should bring customers back to the Figo (or the Ka if Ford chooses to call it that). Even better, Ford would be introducing the Figo in hatchback and compact sedan avatars and that should improve the customer base significantly.Ford’s bigger problem – literally and figuratively – is the Endeavour SUV. Since March 2013, the Endeavour has not had a triple-digit dispatches month, barring November 2013. Since its launch, the Endeavour has not been a volume churner for Ford. Years 2008 & 2010, the Endeavour’s best months historically, saw dispatches of 3328 and 3202 units respectively.That is what the Toyota Fortuner manages to sell in two good months. And herein lies the problem.Ford’s Endeavour, as Vinay points out in the interview, is a rugged machine that appeals to the true-blue SUV enthusiast. The typical Endeavour customer is a SUV buyer who wants an upgrade from the Scorpio / Safari.The Fortuner customer on the other hand may have been in the market with a different shopping list – from the top variants of Executive sedans, the entire band of Premium sedans, and even the top-end of the Toyota’s own Innova. So successful has Toyota been in switching over non-SUV buyers to the Fortuner that the SUV now outsells everything else in the segment…together.Spiritually, the Fortuner and Endeavour are alike. Both are SUVs derived from pick-ups and targeted at the ASEAN buyers with India thrown in as an after-thought. Truck rivaling size, Spartan interiors and inexpensive, previous generation, large-capacity diesel engines sum up the packages for both models. Where the Fortuner scores is in better styling, better fit-and-finish and greater refinement…nearly everything. The Endeavour has also suffered from a relatively long lifecycle. The current generation Endeavour hit the Indian market in June 2007 and arguably appeared outdated on arrival. Ford did an early refresh in September 2009 though the overall package stayed uninspiring. Since then the Endeavour has soldiered on unaided.
Ford would like to change that with the next generation Endeavour slated to hit the showrooms in 2015. Images of the same are available on the Internet and the new Everest / Endeavour seems to have borrowed a leaf out of the Fortuner in its similar imposing stance and handsome front-end. The new SUV carries the Ford SUV family styling and would have no trouble in getting admission to the Indian market as the EcoSport’s bigger brother.
However, what gives us greater confidence is that the same model would also be heading to the Australian shores where it, along with the Flex / Edge, will replace the ageing Territory. A made-for-the-Australian market is a sort of unofficial certification for the next-gen Endeavour’s refinement levels that we would nod our head to.
Pricing again would be the key.