August 1, 2011: Michael Boneham - President and MD
President and MD,Ford India
The new Fiesta has just been launched but it comes at a time when SIAM has talked about just 10-11 percent growth and a slowdown in the industry. What is your view on this?
No doubt there has been a slowdown as interest rates go up and financing becomes harder. These are concerns but they are short term. We are looking at double-digit growth; whether it is in the 10-11, 12-14 or even the 14-16 percent range, it will be much slower than what we saw last year.You cannot always have linear growth and the level of 30 percent YoY was unsustainable. The supplier base was struggling with that, we were also struggling and we needed to take a bit of a pause. I don’t see it as a negative but as a relative slowdown. We will see growth in the long term and we are still predicting five million passenger and commercial vehicles by 2015 and a nine million passenger and commercial vehicle industry in 2030. We are in India for the long term. We will continue to invest and are very confident about our future here.
On the investment front, is there any scaling back on the account of growth slowing down?
We have expressed our confidence in India by announcing eight new products to come here and with all the consequential investment that goes with the product and facility development. We are staying the course. We will, however, have to continually assess the market and make decisions based on those assessments but as of now we are still very confident about the Indian auto industry. We haven’t changed our investment plans.
What do you think about the sudden shift to diesel that’s happened in the last few months and has it played havoc with planning and capacities?
It has actually. We have constraints in our supplier body in terms of supporting this massive swing. In fact, in my 27 years in the industry, I have never seen a swing like this anywhere. If you look at the price differential between petrol and diesel, which is about Rs 23-24, it’s quite significant and people are doing their sums. But I think people may have gone a little too far. They need to sit back and reflect whether it really makes a difference with their respective driving patterns to invest in a diesel. So, in the short term, we do have a crunch on diesels but this is more because of suppliers. We don’t have constraints in our engine plant because for the first time we built a plant where diesel and petrol engines can be built on the same assembly line.
Do you think it’s really a kneejerk reaction from consumers to switch so drastically to diesel without considering the economics of it?
I think kneejerk is too strong a word. What I have learned in the five years I’ve been in India is that the Indian consumer doesn’t only look at initial cost but the overall cost of ownership. So maybe they are looking at the fact that they are driving their cars much more and the price differential being so much, it now makes more sense to buy a diesel. I think on our part, we have to train our sales and service staff to explain to consumers the economics of it while also informing them that a diesel would be a longer wait and petrol is easily available.
You have just launched the Fiesta, which comes from a very confident Ford riding on the success of the Figo. The car's pricing is competitive but not bargain pricing compared to when the Figo was launched. Hypothetically, if you had launched the Fiesta without the success of the Figo, would the pricing have been different considering that the brand perception was not so strong then?
Well, we have announced eight new products to come into India and the Fiesta is the first of those going into the premium saloon segment, a lot different to where the Figo is positioned. What you should look at is the EAP or equipment adjusted pricing. What we have at Rs 8.23 lakh is not a base model, where we have stripped-down features. It will still have audio controls on the steering, airbags, automatic air-con and a large number of such significant features that separate it from the competitive base when the customer looks at it from an equipment perspective. What they are getting is a value-for-money story. We will have best-in-class fuel economy and the customer will make his/her choices based on all of this and not just initial pricing. However, I still think this pricing is pretty sharp based on what they are getting.
Is not giving a stripped-down version anything to do with the fact that you would like to keep a gap between the Fiesta Classic and new Fiesta?
We have a beautiful vehicle available already in our showrooms in the form of the Classic. While this new car – the global Fiesta – positions itself in the premium segment, the Classic is for the buyer who doesn’t want to spend that amount of money. So yes, there is a gap in the positioning. We’re pretty happy now that when a customer walks into the showroom, he sees the value-for-money Figo. The Classic is for the buyer who wants a bit more, and the Fiesta in the premium saloon segment which customers haven’t seen before, and obviously there’s the Endeavour. So we are pretty comfortable with this.
The Figo is really a case study on how a single product has helped rejuvenate the entire brand. Ford was a bit defensive earlier but now there seems to be more confidence. It’s all changed – how does Ford look at this change?
When people review our products and make positive comments like you just did, it gives us tremendous confidence. We are still humble, not arrogant, and I think that is important in this business. Arrogance comes before a fall. We need to continue to deliver great products that customers want and we need to deliver outstanding value for money, which we will continue to do. Right now, we are quietly confident.
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