In the past few months, the Indian passenger car market has had little to celebrate apart from a marginal rise in exports. Although the year-on-year rate of sales decline has been lower than the country’s commercial vehicle segment, that is a fairly shallow positive note. The industry is under significant pressure.
With sales in decline, the industry will watch the next few months carefully, hoping that the many of the new models launched at this year’s Auto Expo in New Delhi will help stimulate sales – against the rising tide of high interest rates, increasing fuel costs and the slowdown in the country’s economy.
The country is due for union elections in the middle of this year. However, it is not certain that a new government can do much to improve the situation. The possibility of a change in government could improve consumer confidence, but no revival in the country’s new car market is expected before the second half of this year.
“We are in the midst of doing nothing; we got an excise duty reduction a few days ago, and on top of this, we are waiting for elections with no idea as to whether we will have a stable government, or not,” said Tom Chackalackal, Ford India’s Executive Director of Manufacturing.
The situation continues to be complicated by the price of fuel over the last three years, and to add to industry confusion, there has been much fluctuation between gasoline and diesel. “What normally happens is, we end up with huge inventory and then we start correcting. Now, Ford is always monitoring and trying to build what the customer needs and ensure inventory matches demand. We have moved out from a possible ‘push’ situation to a ‘pull’ situation,” Chackalackal said, referring to flexibility in manufacturing.
Ford dealerships in India
Ford is linked to every dealer who places an order by the ‘order-to-delivery’ system: the dealer placing the order starts the cycle, and while it can be a pretty long, drawn out process, with a cycle of nearly 90 days, this is a period of stability for all concerned. Ford says it has learned from mistakes in the past and, as a result, the OEM is now trying to keep the system as stable as possible for the supply base, so that they do not go into a churn.
How Ford does this is through its production system, which Chackalackal calls “an umbrella of operating systems” that govern Ford today. This list of operating systems includes safety, quality, delivery, cost, people, maintenance and environment.
“Globally, Ford is now trying to get everything to a common design bill of process so that every plant manufacturing cars is common: common standards, facilities, equipment, and equal amount of flexibility. Part of it is the standardisation and the ability to use this capacity globally,” Chackalackal told delegates at Automotive World Megatrends India 2014.
New car exports from India have grown marginally, and this is exactly how Ford India has managed to use capacity during the last eight or nine months while the domestic market has been on a decline. During the slowdown, the OEM has been shipping more cars to markets like Mexico or South Africa, in order to keep its plant near Chennai busy. This in turn has enabled its supply chain to keep up.
But challenges still exist. According to Chackalackal, one is the need for coated steel – a requirement when exporting to countries where there is heavy incidence of corrosion, and a 12 year warranty requirement. In the domestic market, on the other hand, cost is the key criteria.
On the matter of challenges, Chackalackal cited the example of the port.
“In Chennai, the port could be shut down. One needs an alternate supply chain to keep the lines running, owing to export commitments and volume pressure. Supply chain is another area you could look at what are the alternates, what is the flexibility. With regard to the port situation, we have signed an MoU with Ennore, so we now have the flexibility of using either Chennai port or Ennore for exports,” he said.
“The automotive industry is a high investment industry, intense, with a long gestation period, with frequent model changes. Flexibility is critical to ensure that the manufacturing process can adapt to what the customer needs.” This, he feels, will help safeguard against the sort of economic uncertainty faced by the Indian passenger car industry.
