Why Ford Motors strategy on emerging markets and small cars is great for 50% growth

Alan Mulally of Ford Motors sees 50%  growth from the emerging markets of China,India and Africa. They are increasing small car models from five to  fifteen in China and from three to eight in India.In an earlier post this blog had discussed about how Mulally reduced complexity at Ford and it seems that the current strategy makes sense. Here is why:

  • All through the post industrial revolution, technology transfer has occurred from developed countries to developing countries. Entire cars used to be exported  in the  early 20th century because  although everybody wanted cars the economies were taking time to develop and it was not viable to set up production,assembly or extensive distribution and service centers. With  dramatic economic growth there is both an appetite and affordability for cars today. Also is the technical  capability , in these countries to assemble,service and  provide more bulkier elements of the car including uphostery and most autobody parts. Africa is growing at double the rate of US, while China and India are growing at a four to five times  the US  rate.
  • The small car segment is huge in countries like India ,where a very large population so far able to afford only two wheelers, are   now  able to afford cars and have inspired  the Tata Nano. At segments that are above the Nano is where Ford Motors can play at this huge bottom of the pyramid of the global auto market. Cars need to move on roads and be parked, and smaller cars are helpful if you are thinking about 2.5 billion people in India and China and the roads and parking needed to accommodate  so many cars !   Contact StratoServe.
  • But the bigger compelling logic from US  point of view is that all these smaller cars would be engineered in the US and manufactured here at least for the value added components like engines. There will be huge opportunity to test these cars performing in difficult road conditions and thereby improve design.
  • The huge technical knowledge that will develop as a result will help grow the small car segments in the US and the developed markets.
  • Why should the  US market care about small cars? Because gas prices are not going down very much in the future as in Europe.
  • In addition, the US consumer is becoming more environmentally conscious and prefers greener cars and smaller is generally greener when it comes to cars.

All in all, the Ford strategy sounds great and the question will be the implementation of the strategy at the emerging market end. About StratoServe.

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