Companies

A tale of two automakers: Ford’s failure, Hyundai’s dream run

N Madhavan Chennai | Updated on September 10, 2021

Ford’s Aspire   -  REUTERS

Hyundai’s Santro

In 1996, when Ford Motor Company and Hyundai Motor Company zeroed in on Chennai to set up their manufacturing facilities, one was a brand well known in India while the other not many had even heard of.

In fact, Hyundai roped in actor Shah Rukh Khan and to start with, ran a series of advertisements introducing the company and the brand. Indians, of course, knew the Ford brand and a few had experienced it too.

And 25 years later, the story is very different. Hyundai Motor India has grown to become the second largest player in the country with a volume of 4,71,535 units and a market share of 18.12 per cent in FY21. Ford India, with a market share of 1.84 per cent and volume of 48,041 units in FY21, has just announced that it, in footsteps of its American counterpart General Motors, is shutting down its manufacturing operations in India. It had incurred a loss in excess of $2 billion in the last 10 years alone. Why has India turned out to be a graveyard for American brands even as smaller global brands like Hyundai reaped rich gains?

Different market

The answer is products. India is a very different market compared to the US where size and engine power matter the most. Indian consumers prefer fuel efficiency, low cost of ownership and re-sale value.

Ford understood that a bit late. It is also guilty of taking Indian consumers for granted. Its first car in India was Ford Escort, a product that was consigned to scrap yards in other markets. It was under-powered too and failed miserably. It caused a bad first impression among the consumers, something it could never really shake-off.

Hyundai, on the other hand, did its research and came out with Santro, a small car that perfectly fit into the Indian psyche. It was a big hit and the company never really looked back there after. It built on that success by quickly launching newer models with best-in-class technologies, keeping in mind what Indian consumers wanted. Soon it had multiple winners in its product line-up and that helped it to gain market share rapidly. In no time it became the second largest player in the Indian market.

Flawed product strategy

Ford, on the other hand, struggled to get its product strategy right. It did have some success with Ford Ikon, Ford Fiesta, Ford Figo and EcoSport. But none of these brands gave it the volume it looked for to challenge Hyundai or Maruti Suzuki, the market leader.

Never once did it have multiple best sellers in its line-up. This ensured that its volumes, at best, touched 1 lakh units. Its Maraimalai Nagar (Chennai) plant thus remained under-utilised massively. To make matters worse, it chose to expand at Sanand in Gujarat in 2011 by investing billion dollars. This was part of a new multi-product strategy that was thought up to revive Ford in India.

That strategy failed too even as Ford’s problems at home in the US and elsewhere in the world began to distract it.

A much larger investment and continued poor volumes meant that losses began to pile up. Ford tried to align with other manufacturers like M&M but that did not work.

Apart from products, importance of the geography too played a part in Hyundai’s success and Ford’s failure. Hyundai saw India as a critical market not only for its domestic demand but for exports too. In fact, Hyundai was the first car maker to see India’s potential as a small car hub. It began exporting cars to a host of countries (it now numbers in excess of 100), including the evolved markets in Europe.

For Ford, India was just another market. A market for which it had to develop vehicles from the scratch (as it did not have suitable vehicle in its global product range) by investing huge sums of money with no commensurate returns. It launched specific products for India like Figo and EcoSport.

Their volumes petered off after initial success. They were exported too but the volumes were small. Also, unlike Hyundai, Ford was already present in many Asian and other neighbouring markets and potential for export was less.

With India not becoming a manufacturing hub for it, Ford chose to pull the plug and cut its losses. It forgot the basic premise of business success — put consumers at the centre of the decision making and paid the price for it.

Published on September 09, 2021

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