Ford, Behind in China, Looks to India

Posted by: Bruce Einhorn on February 9, 2010

Officials from Ford and Geely had hoped to announce the sale of Ford’s Volvo subsidiary to the Chinese automaker before Chinese New Year. With the Year of the Tiger roaring in this Sunday, it’s now unlikely they’re going to meet that deadline. According to this report by my Bloomberg colleague Keith Naughton, talks between the two sides have hit a snag over finances and other details such as the extent of Ford’s relationship as a supplier to Volvo after a deal. “They’re not only negotiating a sale, they’re negotiating a complete, intertwined relationship that will last for several years,” auto analyst Michael Robinet from CSM Worldwide tells Bloomberg.

The U.S. automaker could use a lift in China, the world’s biggest auto market. Although Ford is by far the healthiest of America’s Big Three, it’s an also ran in the Chinese market, where GM and Volkswagen are the strongest of the foreign players. The company has enjoyed a good run of late, with Changan Ford, a joint venture with Chongqing Changan Automobile, reporting a big increase in sales in January. As the Detroit Free Press reported on Sunday, that’s 12 months in a row of growing sales. Nice, but Ford still has just 2.6% of the market in China.

The company no doubt is hoping it stands a better chance in the other giant Asian market, India. On Feb. 5, Ford started production of a new compact car, the Figo, its first small car for India, in the southern Indian state of Tamil Nadu. When Ford announced its investment plans back in January 2008, the company had just 2.7% of the market. So the company has a lot of ground to make up in India, too, and there are plenty of other foreign companies also targeting India. But since the market is at an earlier stage of development than China, the American automaker probably stands a better chance of making some gains in India.

Reader Comments

blowfish

February 9, 2010 12:56 PM

Hope Ford will be doing better in the year of the Tiger in the Middle Kingdom, while others are sorting out the stop N go issues, allow her more time to catch up even in her home base.

Dan

February 9, 2010 1:42 PM

Good luck in India. If people there are so proud of an ugly cheap little Tata, you don't think they will give a hoot about Ford or any other biggies.

C. H. Ng

February 9, 2010 9:02 PM

As far as we, the AVERAGE (please note the word in capital letter) Chinese is concerned, these are the main factors when come to decision on purchasing the vehicle (not necessary in this category order):-

1) price 2) engine 3) design
4) reliability 5) service costs
6) second hand value

Continental cars are renowned for their solid built, engine, comfort & safety but unfortunately offsetted by high price, high maintainence cost & low 2nd hand value. Mercedes Benz & BMW retain better resale value than other continental made cars because their brands are more or less symbolised with success & high performance respectively.

No doubt Ford cars are good & attain success in many countries but I doubt they can do the same with the Chinese market. If placed under the same engine capacity & price bracket, no way they can beat the Japanese or Korean made cars. Why? It's not because the Chinese ppl are nationalist or biased but because of their sense of practicality when come to decision on high value purchase.

Having said that, I think Ford can anytime do much better in India as her people like to think very highly of all westerners & tend to treat their every product like something from heaven.

Bala R

February 9, 2010 9:31 PM

Dan - So much for arrogance. Even when Ford is coming to India to find some place in the world that will buy its cars, you still live in arrogance that others make cheap cars. Look around you my friend. Even sensible Americans don't seem to buy ford, GM and Chrysler. Oh wait, did I talk Sensible to the arrogant!

Bala R

February 9, 2010 9:36 PM

@C. H. Ng:
Neither do we (Indians) think very highly of all Westerners, nor do we care for a country which is not democratic enough for Google to operate in. So please reserve your comments for the day when you Chinese have the right to vote. As for now, forget buying a car, you don't even have the right to choose the government that represents you. Atleast we live in a free country.

Bridge

February 9, 2010 10:52 PM

Gone are the days of the colonial hangover. Indians are not fascinated by everything western anymore. When it comes to big ticket items like an automobile they make smart choices. Biggest share of the automotive market is held by Suzuki and Hyundai, not by western manufacturers who sell their old condemned models in India. To sell cars in any market, you need to offer the best that particular market needs. And that is what Tata is offering with the Nano. It may look like a joke to Westerners, but nobody is really trying to sell it to you. You can be content with your gas guzzling SUVs. But next time there is a recession and gas hits $4+, cars from western manufacturers will resemble the Nano. And yes you will be buying them.

Manoj

February 10, 2010 12:23 AM

@Dan - You narrow minded americans will not be able to even imagine what TATA has created!! TATA Nano is the masterpiece of enhanced engineering. We very well know the incomepetence of your banks & auto companies... as for Ford... all its products are sub-standard & way below to even korean products!!!

Arnab

February 10, 2010 1:07 AM

@C.H.Ng: Re "Indians treating western products like something from heaven" ... I agree this might have been the case till 10 - 15 years back, when Indian business & industry was not liberalised. But that's not necessarily the case these days.
@Dan: 'Ugly', that's debatable. 'Cheap', OF COURSE. That's something to be proud of, considering that affording even a $2000 car is a big deal in India, especially for those who did not have the good fortune to be born in a rich developed nation (like you possibly did). And for those who swear by fuel guzzling overpowered cars, 'little' will certainly sound ridiculous!

Ira

February 10, 2010 1:25 AM

Dan
We Indians are proud of the fact that we built the cheapest car and gave a viable safe alternative to family of four (who were previously on a bike). I doubt an Indian common man cares two hoots about the look and yes if you had to live in those conditions your thoughts would mirror theirs.

C.H.Ng
Not every western product is looked upon like a product from heaven. The Company which has the maximum car sales is Maruti -Suzuki followed by Hyundai

Hasagawa

February 10, 2010 4:05 AM

Ford may be an also-ran in the China market, but India is an also-ran in the global auto market compared to China or the US. History tells us that also-rans typically remain also-rans for a long long time. So good luck to Ford but just don't be disappointed by also ran companies operating in also ran markets.

Vivek

February 10, 2010 7:54 AM

Dan.. we do actually give a lot of hoot to global biggies..it may surprise you and many others but the 'cheapest' car in India currently is 'not the highest' seller. Sure, there was a rush to book the ugly Tata car but it was just for a "lot" of people who still have to think twice about stretching their budget from $3000 to buy a small car to around $4000 for another cheap car. At the same time there are also "lot" of people who can and wish to buy a Camry or Civic in India

Carazoo.com India

February 10, 2010 8:31 AM

Nice article.

cc.tung

February 10, 2010 11:04 AM

C.H. Ng,

The Chinese worship Westerners. Four examples: 1) In music China has wholesale adopted Western Philharmonic style orchestra music versus promoting it's own traditional music 2) First names, Chinese (even in China/Hong Kong) readily change their first names to Western first names. 3) Thousands of examples of Chinese females married to White males around the world. Not sure why this is, but rarely is the reverse seen (Chinese male/White female) 4) Religion, Traditional Chinese religions are becoming a minority, even most Chinese leaders follow Western style Christianity. All of the destruction of Chinese culture and religion was done by Communism and the so called "Great leap forward".

Ajay M

February 10, 2010 8:33 PM

I beg to differ from Mr Ng, We are as impressed by western products as are the chinese or for that matter anyone in developing economies of Asia.

Over the years, I see a stronger Indian Auto segment compared to China.

Reasons:
a. Income disparity relatively lower compared to China. Which will allows many Indian to rise up the income chain.
b. Also, Indian Economy is a product of both Private and Public partnership unlike China which is state run. Hence sizable income lies with the People hence in turn comes back into the economy.
c. Quality is not the top agenda for any Chinese, the top requirement for them is Price. Unlike in India, People respect things that last. Since income is limited, they ensure that whatever they spend does give them good returns. Hence Chinese car makers have not been able to make much headway.
d. Current Infrastructure issues have held back good growth in India (beyond 8%). But Infrastructure is slowly getting up the To-do list of the government here. This boost in infrastructure will increase income levels as wells as boost customer spending.

Above are some reason for a stronger Auto Segment.

As for Ford, it is not doing well in India compared to others like Hyundai and Suzuki. Reasons for that is Ford has not yet realized the right mix of quality, comfort and feature.

Ford's Indian Market study has been bad (fiasco). Do not get me wrong, they make good cars. But still if you look at overall package it not worth the money. Hence Indian mostly turn to Suzuki (Maruti) and Hyundai which have biggest market share in Indian Auto segment.

Ford and similarly GM, they have to get beyond their American Thinking. We in India cherish whatever we buy. Indians are not yet into 'Use and Throw' American concept. Indians still believe in 'Use and ReUse'. Hence the Japanese and Koreans do well here since they share the same ideology.

Hope this clears be bias against Indians being lured by Western Products. Indian are only lured by a good deal i.e right mix of Price and Quality and something that they can rely on.

@C.H Ng

February 10, 2010 10:26 PM

"in India as her people like to think very highly of all westerners & tend to treat their every product like something from heaven."

-All most all asian women who pick ANY westerner over little asian guy "think very highly of all westerners & tend to treat their every whiteness like something from heaven".
Hypocrite much?

Raj Rajaratnam

February 11, 2010 10:52 AM

"All most all asian women who pick ANY westerner over little asian guy "think very highly of all westerners & tend to treat their every whiteness like something from heaven".

Well said~! I go to the mall and see a lots of mixed race couples i.e. Asian (as in Oriental) woman with a white guy (from heaven?). Indians on the other hand are the (eastern most) Westerners, and marry their own kind.

The mentality is pretty clear - whether selecting a car or a woman.

Asan

February 11, 2010 6:57 PM

no one gives much a hoot to India except Indians.

@Asan

February 11, 2010 9:18 PM

Asan,
Except Pakistani's. They seem obsessed about India rather than their own failed state.

@Ajay M

February 12, 2010 12:55 AM

"Quality is not the top agenda for any Chinese, the top requirement for them is Price. Unlike in India,..." --- If you did the comparison against the Japanese, I would not say anything. But to say Indians are more quality sensitive than Chinese, you don't have any clue, show me some proof. As far as I know, BMW, Lexus sell 10 times more luxury cars in China than India. Chinese is the No. 2 luxury goods market in the world behind Japan (e.g. for things like Rolex watch etc). Where is India ? Chinese product quality is behind Japan, Germany, but far ahead of India.

Grow Up

February 14, 2010 10:54 AM

funny to see the childish India vs China bickering that has ABSOLUTELY NO VALUE.... the markets are what they are, this is only about personal egos.

Skillocracy

February 15, 2010 5:05 PM

China and India are both in a similar position right now with regard to the Western world and economy... with the advent of globalization, the people of both China and India will see their opportunities increase. We're about to launch a site called Skillocracy that will level the playing field. Check out the discussion on skillocracy.wordpress.com.

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