‘Volume growth may come at a certain margin erosion’

QA

Ford India, a subsidiary of American carmaker Ford, emerged as the biggest car exporter from India last year. The company is celebrating another feat now; the milestone of its first one million car sales in India. It took around two decades to reach there but ANURAG MEHROTRA, president and managing director at Ford India, tells Ajay Modi the next one million will come quicker. He is positive that export of Ford India cars to the US will not be impacted in spite of the push towards local manufacturing. Edited excerpts:

Ford India took two decades to reach one million units in local sales. When will we see the next milestone?

It is a privilege to been able to serve a million customers in India with products such as the Eco-Sport and Figo. I am confident that if we execute the strategy that we have written over the past 18-24 months, we will add another million units faster. The strategy is based on four pillars — strong brand, right products, competitive costs, and effective scale.

We are already seeing some powerful green shoots in the business in terms of volume, customer satisfaction, and dealer satisfaction. Even financially, a significant progress has been made.

Export is a critical pillar for your operations. How has it helped?

Export is one of the key pillars. It is critical for a variety of reasons — it gives us economies of scale allowing us to bring more features at competitive costs

for the Indian market. It gets us forex and allows us to bring more suppliers. Many times sending products from India to mature markets is not seen as a viable option. But we have built stringent processes to deliver that with a cost.

Your domestic volume is about 8,000 units a month. Can we expect this to grow to a five-digit mark?

We are doing 8,00010,000 a month in domestic sales. We can get to the next level of a five-digit volume. But it is going to come at a certain margin erosion. The balance I need to strike is between volume and margin. At the end of the day, you need to be able to deliver a profitable business.

The US market is a prominent export destination for Ford. Is the government’s stance there on imports a concern?

Now, it is business as usual for us. We are sure both the governments will take the right decision in the interest of ensuring ease of doing business. We haven’t baked in any risks yet.

Are we in a situation where cost pressure is expanding and the market is not ready to absorb the increase?

There is a material cost pressure from the forex rate and firm prices of steel, aluminium and rubber. We are absorbing as much as we can but in July, we passed on some of the cost increase. I have not yet seen any dip in demand and footfalls.

Besides, we are trying to bring in more efficiency in manufacturing through steps like commonality of parts across cars.

What kind of progress is being made in the Ford-M&M partnership?

I must tell you that there is a lot for us to learn from M&M and there is reciprocity in the relationship.

The chemistry between the two teams is great. In March, we have announced specific areas of cooperation, including compact SUVs, B-segment SUVs, connected cars and electric vehicles. All the six are progressing in parallel and not sequential.