NEW DELHI/DETROIT — Ford Motor has shelved plans to produce a new compact family car designed mainly for emerging markets such as India and China, industry sources said, reflecting disappointing sales of mainstream models in the world’s fastest growing car markets.
India and China were expected to be the main manufacturing hubs for the new B500 range, slated to begin production in 2018 and to include a premium sedan, hatchback and sport utility vehicle (SUV), two sources with direct knowledge of Ford’s plans said.
The car maker had also planned to build its new models in Brazil, Russia and Thailand, one of the sources said.
Ford’s decision, communicated to its suppliers in July, follows a similar move by General Motors (GM) to postpone the launch in India of a new $5bn family of compact vehicles.
Ford is now planning to redesign the EcoSport, Figo and Figo Aspire in India in 2020-21, according to two separate US sources familiar with Ford’s plans. Its more ambitious B500 programme, though, is on ice because of muted demand for some small and mid-sized hatchbacks and sedans in India and China, where SUVs and “crossovers” combining the hatchback and SUV have proved increasingly popular.
The cost of upgrading plants to produce the new cars would also be prohibitively high, the first source said. All of the sources declined to be named as they have not been cleared to discuss the plans publicly.
“We are constantly evaluating opportunities to better meet the needs of consumers and do not comment on speculation about future product programmes,” a Ford spokesman said.
That said, Ford has invested more than $2bn in India and plans to spend more to set up a global engineering centre in the southern city of Chennai that will help tweak products for the local market and more swiftly adapt to changing consumer trends.
The car maker is also ramping up exports, including to Europe, to maximise usage of its two plants in India.
“India is a key market for us in Asia Pacific,” said the spokesman, adding that the car maker is committed to introducing new products and technologies in the South Asian nation.
But instead of the bigger plan for the key markets of India and China, Ford will focus on updating existing models and develop and build more SUVs and crossovers, moving away from sedans and hatchbacks, the US sources said.
That would allow the company to boost profit margins.
“The global shift to crossovers makes competing in small cars a tough proposition for GM and Ford,” said Sam Fiorani, vice-president of global vehicle forecasting at US-based AutoForecast Solutions. “It makes more sense for them to refresh older products now, harness lower development costs in China in the mid-term, and move towards small crossovers over the long haul.”
Chinese buyers have flocked to SUVs and sales rose 52%in 2015 but growing competition in the small SUV segment from Chinese car makers is putting more pressure on pricing.