Ford Motor Co was slow out of the starting gate in Asia, but now the No. 2 US automaker is betting big on the region to drive global growth, the company’s Asia-Pacific chief said.
Ford has just announced plans to spend US$1 billion to build a second car and engine complex in India as it ramps up production to exploit the country’s fast--growing vehicle market, bringing the number of plants it is building in Asia to seven.
“This is the only place in the world where we have new plants under construction,” Joe Hinrichs, head of Asia-Pacific and Africa for Ford, said in an interview on a visit to New Delhi.
Rising incomes and rapidly expanding young populations have turned Asia into a battleground for global car manufacturers such as Ford, GM and Toyota, which hope to grow revenues by steering towards the Asia-Pacific region and Africa.
“Today one out of six Ford vehicles is sold in this region and by the end of the decade we expect about a third of Ford vehicle sales to come from here,” said Hinrichs. “That’s why we’re investing.”
However, he recognizes the Detroit firm still has a long way to go to make the region a significant revenue generator. Ford is just a minnow with only 3 percent of the markets in China and India — the two fastest-growing globally.
Ford began selling its cars in 1996 in India and in China one year later, but only recently stepped up its game as it emerged from recession and restructuring in the US.
With first-half net profit of US$4.95 billion, “we now have the financial solidity” to attack Asia, Hinrichs said. Since 2006, Ford has invested US$5 billion in the Asia-Pacific and Africa region, including the Gujarat plant.
India is the sixth-largest auto market globally, with 2 million in annual sales, but industry tracker JD Power and Associates sees it becoming third-biggest by 2020, while China holds the top spot with 18.1 million sales last year.
Rivals such as leading US automaker GM, Toyota and Volkswagen still have much bigger brand recognition and higher sales than Ford in the region, while in India, the company faces fierce competition from Japanese-owned Maruti Suzuki.
However, Hinrichs believes Ford can make up lost ground.
“You see the potential Ford has in Asia if we can do here what we have done elsewhere,” he said.
Ford holds 17 percent of the US market and 8 percent of the European market.
Deepesh Rathore, India managing director of research firm IHS Automotive, said: “It may be tempting to say Ford may already be late to the party [in Asia], but we have the belief that strong sales growth momentum in these markets gives every carmaker ample opportunities to grow.”
Ford, which aims to increase global sales by nearly 50 percent by mid-decade to 8 million vehicles a year, sees signs of progress.
Last year, in India where the small car is king, it launched the Figo hatchback in what Hinrichs calls a “gamechanger” — tripling Ford sales to 83,887 units for the year. In China, Ford sales last year jumped 40 percent to 582,467 vehicles.
To bolster its product roster, Ford is bringing eight new models to India, including the just-launched Fiesta, and 15 to China by 2015. It is also rapidly adding dealerships to attract buyers.
Car sales in India and China are slowing this year. However, Hinrichs believes the fundamentals of the two markets are strong, with each country boasting a population of at least 1 billion.