What lies beneath Ford India's careful exits

Sidhartha Shuklamoneycontrol.comIn July, Ford Motor turned down its Indian unit's decision to be part of a supplier group for electric car parts. A case of parental disciplining? It certainly wasn't a one-off though. Last month, Ford, according to industry sources, decided to shelve its compact car plans in India. The word on the street is Ford wants to play it safe in a market which hasn't rewarded its small car bets so far. To be sure, Figo and Aspire -- Ford's hatchback and sedan -- weren't doing too well. Figo sales came down 60 percent between October 2015 and March 2016, while Aspire sales also declined 74 percent between its launch in August last year and March 2016. Ford responded with heavy price cuts of up to Rs 91,000 in these roadsters. Given how its competitors Maruti Suzuki and Hyundai were raising prices of their models during the same time, Ford's move signalled a desperation to cut its losses. More importantly, it didn't want to make new investments.Damages, if Ford had gone ahead...Ford will have run up huge costs for upgrading plants to manufacture the new cars under the small car project, say sources to media, who cite it as one of the reasons why the automaker pulled out of it. An official word from the company is still awaited.Similarly, if Ford had thrown its hat in the ring for supplying electric car parts, it would have had to cough up an initial Rs 4.4 crore for every model it makes. While Ford's withdrawal from this consortium (which included M&M, Maruti Suzuki and Tata Motors) may deal a blow to the Make In India project, for the company, the move was probably in line with its intention to avoid cash burn. Focus Now On...Understandably, Ford decided that it will focus on SUVs -- riding on Ecosport wave--and crossovers. Ford has invested around USD 2 billion in Chennai and Sanand (Gujarat) and in August it exported 17,860 vehicles, the highest ever exports in a single month for the company.

With key reforms like GST and Seventh Pay Commission on the way, consumer demand is likely to pick up. If the government can be believed, then a new market-friendly scrappage policy won't be far behind, too. And soon enough foreign players may even rethink their India strategy.