Recently one of the biggest announcements in the Indian auto sector was Ford Motor Company’s decision to end local production of vehicles. The company feels it is no longer profitable to make cars in India, and thus has decided to cease production at both its plants, in Chennai and Sanand. While such a decision certainly has big implications on the new car market, as well as existing customers, the impact on the used car market cannot be left out. Especially, given the fact that models like the Figo, EcoSport and the Endeavour are quite popular in the pre-owned vehicle market.
Now, one of the biggest implications of such a decision will mainly be on the decision-making process of a used car buyer. Any used car buyer, who might have been thinking of getting a pre-owned Ford vehicle, will now worry about parts availability and service. These fears will be shared by existing Ford owners as well, in addition to concerns regarding the resale value of the vehicle, which is also bound to take a hit.
Expressing this very notion, Ashutosh Pandey, MD & CEO Mahindra First Choice Wheels Ltd (MFCWL), one of the leading organised used car players in the country, said, “Discontinuance of any big player in the market does have an impact on the price of the brands from the player in the used car space. Most of the effect is psychological, with prospective customers having concerns on parts availability, service network and support by the OEM. It is difficult to put a value to the price drop, but it could range between 5-10 per cent depending on the market.” We also reached out to other organised used car sellers like CarTrade and Cars24, however, they have declined to comment on this matter.
On the other hand, auto industry expert, Sridhar V, Partner, Grant Thornton Bharat LLP. said, “There will be a discount to the price of a used car from the current levels, once it is understood that they are either to be discontinued or if the OEM pulls out its operations thoroughly. In this case, while I understand that there will be a lesser number of dealers and service network around to support new customers, for some of its imported offerings to the market, and possibly the existing customers, one will have to see how it pans out for the models which have been sold here in India, which again are predominantly India centric and the OEM may not have plans to support them beyond the typical 10 year period they do.”
Sharing his views on the matter, auto industry expert, Avik Chattopadhyay said, “Once an automaker leaves a market for good, the resale value of that brand is almost wiped off. I remember what happened to both Daewoos and Chevrolets once both operations closed. Overnight the resale value of Chevy Beats and Sparks were eroded by 70-75 per cent.”
While Ford has decided to stop making and selling locally manufactured cars, the company has been very clear that it will continue to support its customers with after-sales services and spare parts. In fact, instead of being a sales and service touchpoint, Ford’s dealer network will now offer parts and service support. Furthermore, Ford will continue to sell the Mustang, which is fully imported and plans to bring in more global products via the CBU (completely built unit) route. Also, Ford will maintain its parts depots in Delhi, Chennai, Mumbai, Sanand and Kolkata. And that means the company is here in India for the foreseeable future. So, if you are planning to buy a used Ford vehicle, you certainly won’t need to worry about parts availability and service.
All that said, the big question is will there be people who would still want to buy a used Ford car? We asked the same question to MFCWL’s Pandey, who said, “Ford vehicles are quite popular in the used market, so there will remain reasonable demand for models like Figo, Ecosport and Endeavour. The likely marginal price drop might make the vehicles even more price competitive. In the used car market, customers tend to prefer tried and tested models, and Ford vehicles are considered quite sturdy and reliable.” Grant Thronton’s Sridhar, on the other hand, said, “The price (of used Ford cars) could significantly reduce as we move closer towards the sunset period and may have fewer takers.”
On the other hand, Chattopadhyay said, “Smaller cars of exited brands still have some hope as the network will have some supply of spares and the unorganised service centres will still take care of them for a couple of years. So, at a hugely depreciated value, there will be a market, especially in areas that have network support. For the larger vehicles there is just no hope. Which implies that the Figo, Freestyle, Aspire and Ecosport will still have some life left while the Endeavour will be a basket case.
Ford deciding to cease manufacturing and selling locally made cars is certainly unfortunate, however, the carmaker has decided to stay and sell fully imported vehicles and also continue to offer parts and service support. This means the situation is slightly different from what Chevrolet did a few years ago when it decided to pack up its entire operations and leave India. Having said that, the full impact of Ford’s decision on the Indian car market, both new and pre-owned, is yet to been seen, something which has been very clearly highlighted by the industry experts we spoke to.