Ford’s new Emerging Market Operating Model (EMOM) has helped the company to make profits in India after a very long time
Ford India started its operations in 1998 and they had success with some products but the market share is always below its global competitors Suzuki and Hyundai. For the first time in a decade, the company registered profits in the last fiscal year and the blue oval brand is looking to explore the market further with its Mahindra partnership. Earlier the company was following ‘One Ford’ formula, which is very successful in developed markets but it took some time for the manufacturer to understand that it won’t work in India and other emerging markets.
Ford’s top executives from Asia and India came up with a new initiative called Emerging Market Operating Model (EMOM) in 2016 and they decided to test it in India. This was the turn around for the company and it reduced the costs drastically. The company decided to localise more parts from 60-70 percent earlier to the current 85 per cent.
The logistic costs have also come down by 20 percent as they use rail freight instead of roads and this is much more efficient too. The company adopted a low-cost dealership format in which fewer cars are on display and this alone cuts 50-60 million. Under new format, Ford has opened more than 100 dealerships in 18 months especially in small cities and towns as growth from these areas are key to the success in future. Ford announced the Mahindra partnership last year and a similar strategy is also used in China, as both these markets will dominate the automotive industry in future.
Under the new partnership, Mahindra and Ford are developing two new platforms and the first product will reach the market by 2020, while the second product is currently under evaluation. Ford is also using Mahindra as a benchmark to bring down suppliers cost in Asia region. The low-cost electric technology of Mahindra will be used by Ford and the first product is expected to be the electric version of Aspire subcompact sedan, as the Indian manufacturer is currently working on improving its EV technology for future models with better range.