Ford's plan for China and Asia hasn't really worked for many reasons; however, the demand for dependable vehicles in these markets is witnessing a shift from small and compact cars to SUVs and crossover vehicles holds the most water. Gone are the days when sedans and mid-size vehicles dominate the roads in these emerging markets. A need for more room, lower costs, and cheaper fuel prices are only a few of the benefits consumers find appealing about these considerably larger vehicles. As a result of declining popularity and expensive taxes on small-engine cars, Ford's plan to sell small and compact vehicles in these markets has stalled.
In most cases, consumers in these markets are limited to one vehicle, and require more space to accommodate their daily travel needs. For those reasons, the ample seating room and cargo space of SUVs add to the charm of these vehicles. SUVs and crossovers offer an elevated view of the road and impressive traction, which consumers deem valuable when commuting on rugged roads in rural areas outside the major cities. Additionally, young professionals enjoy the increased functionality and positive image associated with driving SUVs and crossovers.
According to Fortune, Ford has invested more than $2 billion in India to develop a global engineering center that can adapt quickly to evolving consumer trends. The shift from compact vehicles to SUVs and crossovers in this market has caused Ford to concentrate more on modernizing existing models, while developing newer SUVs and crossovers targeted directly to the needs of the consumer.
Sam Fiorani, vice president of global vehicle forecasting at U.S.-based AutoForecast Solutions states, "The global shift to crossovers makes competing in small cars a tough proposition for GM and Ford. It makes more sense for them to refresh older products now, harness lower development costs in China in the mid-term, and move toward small crossovers over the long haul."
One of the primary reasons Ford's plan for China and Asia has staggered revolves around redesigning the assembly line at the Ford plant in Gujarat to efficiently produce B500 vehicles for markets in China and India. This adjustment would have required an increase in manufacturing jobs, and an investment of over $100 million, which has a direct effect on Ford's profitability. The declining popularity of small and compact vehicles, as well as the marketability of SUVs, has forced Ford to consider redesigning the Ford EcoSport crossover, Figo Aspire, and Figo hatchback for release between 2020 and 2021 to improve profit margins and gain market share.
Simply put, in Ford's eyes, ditching compact vehicles for SUV and crossover vehicles designed specifically for markets in China and India can help increase profits, however, the overhaul may take more time and revenue than the company initially anticipated.