Ford continues to struggle globally by posting losses in moribund European economies, and – surprisingly – the growth markets of Asia Pacific and Africa.
Ford India today announced it has completed the expansion of its Chennai engine plant, increasing annual engine production capacity 36% to 340,000. The additional capacity of 80,000 diesel engines helps meet increasing demand for diesel powertrains in India as well as export markets. The expansion, which Ford hopes will be ongoing, led to the hiring of 200 employees.
India is projected to become the world’s third largest light vehicle market by the end of the decade after China and the U.S. Ford lags badly behind competitors in Asia, and is playing catch-up. The plant is the first Ford manufacturing site in the world with a single flexible production line manufacturing both gasoline and diesel engines. It is also the first Ford plant to run a flexible crankshaft production line, and to have a fully flexible Cold test, Hot test and Dyno test facility for gas and diesel engines.
More than 2.7 million passenger cars and light-commercial vehicles were sold in India in 2010, up from just 700,000 light vehicles in 2000. India, a country with a population of nearly 1.2 billion, is expected to reach 11 million light-vehicle sales by 2020, according to a report titled “India Automotive 2020: The Next Giant from Asia,” by J.D. Power and Associates.
However, India will not be as profitable as the U.S. or China. Almost 80% of all new passenger vehicles sold in India were either minicar or subcompact passenger cars. By comparison, the minicar and subcompact segments accounted for only 24% of passenger-vehicle sales in China in and just 3% of passenger-vehicle sales in the U.S.
The average transaction price for all new passenger vehicles sold in 2010 in India was $10,000 (compared with $17,500 in China and $28,000 in the United States), while the best-selling passenger car in India, the Maruti Suzuki Alto, had an average transaction price of about $6,200. While India’s emphasis on small vehicles has helped sales to grow quickly, it also means that automaker earnings will depend primarily on small car segments, where profit margins are traditionally thin.
