Why Ford isn't giving up on India, home of EcoSport SUV

NEW DELHI — Americans might not know much about Ford's operations in India, but some may soon be driving a vehicle made there.

Ford's newest, smallest SUV in the U.S., the EcoSport, is imported from India.

That's only one product of Ford's effort to make a business success out of its Indian operations, reviving old partnerships as the company makes a fresh pitch to crack one of the world’s highest potential, but equally challenging, car markets.

Having invested $2 billion but yet to make a profit, the company has gone back to local heavyweight Mahindra & Mahindra, best known in the U.S. for its farm tractors, to work out new products and partner on cost-effective technologies, including those related to electric powertrains.

Ford, whose sales in India have risen in recent months year over year, holds just a 2.7% market share there. The company hopes Mahindra will help it gain access to local suppliers while enabling cost-efficient development of vehicles, especially SUVs.

Ford entered India in 1995 and partnered with Mahindra — then itself a fledgling player in the passenger vehicle business — though this was short-lived. The two parted ways in 1998, as Ford drew up an ambitious plan, perhaps looking to find a stronger-run standalone as it also planned to use the India factories for meeting export needs.

However, Ford has managed little success and has remained — more or less. 

It has been hanging on with vehicles such as the Figo compact, launched in 2010 after an in-depth examination of the Indian consumer. It was the first vehicle that got Ford into the heart of buyers.

However, the success did not last, and Ford failed to repeat the same story with subsequent products.

Now, it has decided to continue seeking a foothold in the tough market, where General Motors abandoned efforts last year. The potential reward is strong. India is expected to surpass Japan within a few years as the world's third-largest vehicle market, and sales are projected to double to 6 million a year. 

EcoSport success

A turning point in the company’s India story came in mid-2013 when it launched the EcoSport, the subcompact SUV that once again managed to lure Indian buyers into Ford showrooms, prompting the company to set up a new factory and double investment.

Starting in January, Ford has brought EcoSport to the U.S. It has sold about 6,000 of them so far, half of them last month as promotion for the vehicle ramps up, Ford spokesman Dan Jones said.

Some 59% have been snapped up by women buyers in the U.S., about twice Ford's overall average, and 31% are being sold in Ford's premium grades, which make them more profitable, Jones said. They are made at Ford’s Chennai Vehicle & Engine Assembly Plant on India's east coast.

Are electric vehicles the future?

With Mahindra, Ford has struck a partnership for budget electric vehicles and SUVs. The deal follows an announcement in September in which the companies agreed to explore strategic cooperation for driving what they called profitable growth in India and other emerging markets.

Ford’s agreement with Mahindra comes as the company looks at budget electric-vehicle technologies and access to affordable suppliers. The Indian government has said that it wants companies to transition to electric vehicles by 2030 as it announces large orders for the clean vehicles in the intervening period.

For its part, the Mahindra group is seeking refinement and help in the area of vehicle development from Ford, especially when it comes to off-roaders, while also looking at cooperation in effectively targeting markets in Africa and other export regions. 

Ford says it is on board.

“Ford is committed to offering the best vehicles, technologies and services that fit the lifestyles and preferences of Indian consumers," said Jim Farley, Ford's president of global markets.

Midsize SUV ahead

Ford and Mahindra said they will co-develop a midsize sport-utility vehicle that would later be sold under their individual badges.

Also on the agenda are plans to evaluate co-development of a compact SUV as well as an electric vehicle. It is believed Mahindra has helped Ford develop an electric version of the Aspire mini-sedan that it sells in India. Ford is understood to be looking at launching the vehicle in India next year, while it is yet not clear whether it also plans to export it to other markets.