Can Ford's EcoSport take on Renault's Duster?

Last Updated: Wed, Jun 26, 2013 04:17 hrs

The rush to launch sports utility vehicles (SUVs) in India continues. After Renault, Mahindra & Mahindra and Maruti Suzuki, Ford is set to launch the EcoSport on Wednesday. The company-a relative latecomer to the country's SUV market-says the EcoSport will be a game changer.

Sure enough, the vehicle, which was rolled out from Ford India's Maraimalai Nagar plant in Chennai last week, has already created quite a lot of stir. Experts have greeted it with good reviews, and they say it will be a serious contender in the market.

A lot has been riding for Ford on the EcoSport. The company has invested $142 million on the plant in Chennai-its fifth facility in the world for manufacturing the SUV. The other four plants are in Brazil, China, Thailand and Russia. What makes Ford particularly bullish about the prospects in India is the recent surge in the demand for SUVs, even as the auto sector remains downcast. Passenger car sales fell for the seventh straight month in May. For the 2012-13 on the whole, car sales dropped 6.69 per cent to 1.89 million units. However, demand for SUVs increased 52 per cent in 2012-13 to 553,660 units and it is only expected to grow in the future.

Clearly, that's a huge market for any automobile maker to miss. "Who would have ever thought that a small SUV on a (compact vehicle) platform would be one of the fastest growing segments in India," says Alan Mulally, president and chief executive, Ford Motor Company, who was in Chennai last week to witness the rollout. "The B-segment compact SUV is what India customers have been looking for over the years," he adds.

Apart from the EcoSport, Ford is set to launch a few more models in the segment in the future. Mulally says globally Ford will produce 2 million vehicles under the segment by 2015, with a part of this demand being met through the Chennai plant.

However, Ford will have a tough fight in Renault's Duster. Both-the EcoSport and the Duster-were unveiled almost at the same time last year, but while the EcoSport is yet to be launched, the Duster has already hit the showroom and acquired a sizeable market in India. Since its launch last year, it has upstaged the country's biggest car maker, Maruti Suzuki, for three months in a row in the SUV/MUV segment. In May, 5,146 Dusters were sold as against only 4,306 Ertigas.

No doubt, Ford will now have to play catch-up to compete. Its direct competitor will be Renault's Duster, which is also a compact SUV. Other players like Mahindra & Mahindra and Maruti Suzuki are not present in the compact SUV segment as of now.

Deciding factor
Yaresh Kothari, analyst (automobile) at Angel Broking, says: "Definitely it is exciting, but everything boils down to pricing. If the product is priced well, then it will succeed." He also adds that "slowing demand may affect sales."

Mullay, however, is confident of making inroads in the Indian market. "We looked at the Indian market seriously only in 2006 and our first major product was in the B segment-the Figo. It created excitement after the launch and today it is doing well both in the domestic and the international markets. Now the EcoSport is being added in the same segment as a compact SUV and one would see more products in this segment going forward," he says.

Analysts say the EcoSport's success in the end will depend on pricing. "People don't associate with brands in India, what they look for is value for their money, which is both initial investment and the cost of ownership," says another analyst who does not want to be named. He says Hyundai is a classic example of this. When it launched the Santro in India, people wrote it off saying it looked like a "rat". Despite that, sales soared. "People accepted the car because its ownership cost was less," he says.

Analysts says nearly 60 per cent of the customers in India look at the price when they buy a car, while only 30 per cent go for design and just five per cent take their pick based on the brand.

Ford, of course, has taken note of this. Mullay says the company has been paying special attention to performance, fuel efficiency and cost of ownership. He says the Figo stood the test on all these grounds and the EcoSport will match up to expectations as well.

Cost-cutting measures
The company has taken several steps to keep the cost of ownership low. First among them is the use of so called "child parts", or sub-components. This means in the event of a breakdown, only the faulty part will have to be replaced instead of the entire assembly. For instance, the Figo (and also the EcoSport) comes with a replaceable door skin. So, when there is minor damage to the door, only the door skin is removed and fitted with a new one instead of changing the entire door. The same applies to other parts such as the piston assembly, alternator assembly and the exterior mirror assembly. I"With heavy road congestion, door repair is both frequent and quite expensive in India," says PK Umashankar, vice-president (customer service operations), Ford India. "In many instances, simply replacing the door skin rather than the entire door can save customers a substantial amount of money," he adds.

Ford has also localised its vehicles heavily to keep costs low. Nearly 80 per cent of the Figo's parts are procured from within the country. While the company did not give the details on the extent of localisation for the EcoSport, it said a large part of this vehicle too is sourced domestically. Ford also says the EcoSport will benefit from the economies of scale in terms of sourcing since the vehicle is produced globally. A three-pronged strategy has also been worked out to increase fuel efficiency, improve design and expand its sales and customer service network.

Serious contender
While the company is tight-lipped on pricing, analysts say the EcoSport is likely to be cheaper than the Duster as the company might want to firm up its position by competing on prices to start with. The SUV may be priced at par with mid-sized sedans such as the Honda City (ex-showroom price starts at Rs 7.29 in Delhi). "EcoSport will be a value proposition as a sub-four- meter car," says a Ford India official.

That apart, what will make the EcoSport a serious challenger to Renault's Duster will be its exteriors, interiors, stability and performance. Also, the arrival of the EcoSport will widen the choice for customers in the compact SUV segment, at the moment dominated by the Duster alone, wrote an automotive journalist in his review after test driving the vehicle. However, in terms of performance, the EcoSport won't be significantly different from the Duster. Analysts also say the EcoSports' smaller dimensions (sub 4-metre) and lighter controls will make it better suited for city driving compared to the Duster.

Ford India President and Managing Director Joginder Singh says, "We believe it is not only a game changer for Ford in India, but we are going to set a new standard in the industry as well."

Renault, though, is not too worried about the new entrant. Sumit Sawhney, executive director (marketing & Sales), Renault India, says the Duster's popularity is well established and, coupled with its extensive network of dealerships and after-sales experience, the vehicle will continue to hold its ground in the market. "Renault India is confident the Duster will continue to be a competitive offering in the market," he says.

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