/Ford Motor Co. is coming a little late to the race to design an ultra-low cost car for first-time car buyers in developing markets, but company executives have learned a lesson from rivals that moved first.
Affordable, yes; cheap, no.
Ford is unveiling in Brazil on Wednesday a prototype for a new tiny subcompact car called the Ka that aims to tackle the entry-level buyer in countries where being middle class means you can just afford a car that costs about $10,000, or a third the average price of a vehicle sold in the U.S. With a car like the Ka, Ford hopes to boost its global sales to 8 million vehicles a year from just over 6 million forecast this year, tapping new customers in South America, North Africa, India and China.
Other companies have had limited success going after this market. India’s Tata Motors Ltd. has struggled to sell the Nano, which can cost as little as $2,000. The Indian firm invested $400 million in developing the car, originally marketed as a step up from a two-wheeled vehicle. The car is selling at a quarter of the volume that its factory is capable of making.
“In the case of the Nano, one of the lessons for us is be very cognizant of how you position your brand and product,” Mark Fields, chief operating officer of Ford, said in a conference about business in India two weeks ago. “They kind of positioned it as a step up from a motorcycle. And when people are buying vehicles, it’s a big deal in their lives, and they want to feel like they have made it. That was a real learning we saw and we are factoring in.”
Ford isn’t revealing all the details about the production version of the Ka yet, but it will likely go on sale in South America in 2014 before spreading around the world.
To avoid the Nano curse, Ford took time to add chrome details, and give it a wide, low stance so the car doesn’t look “tippy,” said Joe Hinrichs, Ford’s president of the Americas region.
“We spent a lot of time making sure it still had a premium look to it, which is not true of a lot of our competitors,” Mr. Hinrichs said.
Ford is trying to differentiate itself from the other super-low cost cars by making the vehicle appear more substantial than its competitors. It comes standard with Sync, Ford’s mobile-phone pairing system. But it is smaller than a Fiesta, it will likely have a less expensive engine, lower-cost interiors and smaller wheels. The car, for example has a docking location for a smart phone that will take the place of a more expensive navigation screen.
Ford would not say whether the car would have safety systems like anti-lock brakes, air bags or traction control, which are found in cars in most regions of the world, but can be expensive.
Ford currently sells inexpensive cars in different markets around the world, including a Ka in South America and Europe and a Figo in India. But the cars are different in each market and the new vehicle is the first one developed for a global launch at sub-$10,000 price.
The Ka will first go on sale in South America and then likely spread to India, China, the Middle East and North Africa. Ford’s estimate is that sales of this type of low-cost car will grow by 35% to 6.2 million total vehicles by 2017, while the total industry grows by around 12% over that period.
Vehicles like the new Ka “will be the backbone of growth in new emerging markets as consumers seek to move up the economic ladder while still staying within their means,” said Suraj Krishnan, a director in the automotive practice at consulting firm, AlixPartners LLP. “However, moving down-market to these segments has been a challenge” for many global automakers.
Few companies have been successful in making a profit with a low-priced car. Ford’s least expensive model is the Figo, which costs between $10,000 and $12,000.
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