Ford Figo faces slowdown on rising interest rates

Sales of the Ford Figo have been steadily dropping since January. From January to March Ford sold an average of 8,400 Figos a month, but from April to June the sales have dropped to an average of about 5,700 Figos a month. That’s about a 32% drop in this quarter compared to the previous quarter.

Sales in the April-June quarter tend to be the lowest traditionally, so it could be argued that this is a seasonal drop. But the sales performance of the market leaders, Swift and the i20, tells a different story. While Swift dropped 4.5% in the April-June quarter compared to the previous three months (and this entirely due to the sales loss due to the strike in June), the i20 sales in this quarter actually rose by 11.5%.

So clearly, the loss in momentum with Figo has reasons elsewhere. And Ford is probably aware of this fact. Earlier this week, Ford announced a 0.25% cut in the interest rate and a 50% waiver on the processing fee for car loans through HDFC. It also announced a monsoon camp for Figo owners, offering discounts of up to 50% on some parts and free car washes.

Will these measures help boost Figo sales? In India, 80% of hatchback purchases are made through bank loans, so the interest rate reduction should certainly help.

The product is robust, with many good features on offer at an attractive price. The top-end Figo petrol and diesel models offer ABS, airbags, electric mirrors and Bluetooth at prices much lower than the competition. Take the Figo petrol Titanium for example. It’s priced at Rs. 4.65 lakh ex-showroom Delhi. The top-end Maruti Swift ZXi is priced at Rs. 5.4 lakh. Yet, the Swift continues to sell an 10,900 cars a month (despite the drop in June sales).

The answer probably lies in the fact that consumers have become even more conscious now about fuel consumption. Ford India managing director Michael Boneham too told CarToq in an earlier interview that the bulk of Figo bookings are now moving towards the diesel version.

But when consumers look at the engine choices on offer, the Swift and the Hyundai i20 seem like better deals, as long term running costs may work out cheaper. The Figo petrol gives a claimed fuel economy of 15.6 kmpl. The Maruti Swift has a claimed fuel economy of 17.9 kmpl.

The Ford Figo diesel gives a claimed fuel economy of 20 kmpl. The Maruti Swift diesel, with a higher power output of 75 bhp of power, gives a fuel economy figure of 21 kmpl.

There’s also the perception that Ford maintenance costs are higher than Maruti and Hyundai. That’s something that Ford is trying to change. Boneham told CarToq that Ford Figo spare part costs are actually best-in-class, but that’s something Ford needs to effectively convey to its customers. Past experiences with earlier Ford cars (Escort, Ikon and Fiesta) have made customers quite vary about service standards and costs of Ford vehicles.

The monsoon scheme, with discount offers on spare parts, will help Ford address some of these issues with the potential buyers.

In the tough market environment, where interest rates are high, Ford is probably seeing customers seeking solace in more familiar brands (hence the sales number of the Swift and i20.) Fighting this behavior, Ford will have to keep figuring out how to improve the proposition for its best-seller in the market.

Will these measures help boost Figo sales? Or is Ford too caught up with its new global Ford Fiesta sedan launch to focus on the Figo at the moment? The Figo meanwhile is slowing expanding its global reach, with sales to Bahrain and Kenya beginning in June. But in its biggest market, India, it’s time for some marketing blitz, while the chips are down.