While the overall passenger vehicle market remained stagnant, UVs and SUVs priced below Rs15 lakh recorded 54% growth in FY13. With very attractive pricing and features, Ford's Ecosport will challenge M&M's Quanto, Maruti Suzuki's Ertiga and Renault's Duster—at least initially

With a starting price of Rs5.59 lakh, Ford India's entry into the sports utility vehicle (SUV) space with its Ecosport will certainly pose a challenge to Mahindra and Mahindra’s (M&M) Quanto, Maruti Suzuki India’s (Maruti Suzuki) Ertiga and Renault’s Duster, the leaders in compact SUVs at present. In addition, Ecosport may cannibalize sales of some higher-end hatchbacks like Hyundai’s i-20, Maruti Suzuki's Dzire and Honda Amaze.
 

The only thing that can play spoilsport for Ecosport is limited dealership of Ford India and overall market sluggishness. After witnessing high volume growth in FY13, the growth of UVs has come off to around 4% during April and May 2013 due to a slowdown in overall passenger vehicles. During FY13, passenger car sales declined 6% while UV sales grew by over 54% to 5.29 lakh units on a shift in consumer preferences and new launches at attractive pricing range.

“We expect Ford Ecosport will be able to attract consumers” attention due to attractive pricing along with various features, but the initial momentum will not sustain due to continued slowdown in the passenger vehicle industry. Further Ford’s dealer outlets (230 as of March 2013) will constrain its sales,” said BRICS Securities in a research note.

According to Religare Capital Markets, with the launch of Ecosport, competition is likely to intensify. “We believe Ford’s new model could offer tough competition to Renault and also to incumbents. UV sales have already slowed post the excise duty hike announced in Budget 2013, and amid a moderating diesel-petrol price gap, Ford’s Ecosport could fuel further competition and exert pressure on volumes of existing players,” it said in a report.

Attractive pricing to boost initial sales

The EcoSport comes in three engine options: 1.5L diesel engine priced between Rs6.69 lakh and Rs8.99 lakh, 1L EcoBoost turbocharged petrol engine between Rs5.59 lakh and Rs8.45 lakh and 1.5L petrol engine between Rs7.90 lakh and Rs8.29 lakh. Bookings for the vehicle have opened the past week.

The starting price of Renault Duster is Rs7.99 lakh with its diesel version starting at Rs8.73 lakh. Both Ecosport and Duster have similar 1.5L Turbo diesel engine, except that Renault offers a 6-speed gearbox while Ford has provided a 5-speed one.

According to BRICS, initial bookings for Ecosport can go up to 15,000 to 20,000 units within three-four months. “However, this will normalise to about 3,000 units per month due to the slowdown in the overall industry,” the brokerage said.

Competition set to increase

Ford’s first offering in compact SUV space in India is most likely to pose competition to M&M’s Quanto, Maruti Suzuki's Ertiga and Renault's Duster. Further Ford has positioned Ecosport as an urban vehicle, which may eliminate direct competition with M&M. The Mahindra group company has two distinctive advantages, one the rural market contributes to over 50% of its sales and it offers SUVs with higher engine displacement at the same price range.

This also means, the main rivals for Ecosport would be Ertiga and Duster. Given Maruti Suzuki’s unmatched distributor network as well as service centres across the country, it would be difficult for Ford to make inroads. This leaves only Duster as the main competitor for Ecosport and by keeping lower price and providing more features, Ford surely has ruffled some feathers.

Since its launch in July 2012, Renault is selling about 5,000 units of Duster, thus steadily eating the urban market share of M&M. Ertiga also has garnered average monthly sales of 6,000 units. M&M’s two flagship SUVs, XUV500 and Quanto have monthly average sales of 2,200 units and 1,500 units, respectively.

According to reports, in order to counter the onslaught of urban compact UVs, the Mahindra group company, also the largest UV producer in the country, is planning a compact version of its XUV500. By keeping the length of this compact UV at less than four meters, M&M should be able to keep its pricing attractive. With the attack of more and more automakers, especially on price front, which is supposed to be its stronghold, M&M sure knows how to play its game.