How Significant Is Ford’s Mustang Launch In India?

Recently, Ford Motors (NYSE:F) launched its much awaited “Mustang” model in India and the company claims that its first lot allocated for the country is already sold out.  While the Mustang was launched in the U.S. nearly five decades ago, its Indian launch is much delayed given the popularity of the model in the region and its Bollywood and Hollywood connections.  The luxury car market in India is growing significantly and is expected to double to nearly 90,000 units by the end of 2020. While the overall size of this market is not very significant and Mustang cannot be technically termed as a “luxury car”, entry into a new market where the model is already popular will boost Ford’s revenues. However, the impact will not be very significant, given the niche segment and small market size.

International Business Accounts For Less Than 10% Of Ford’s Valuation

As per our estimates, Ford ‘s international cars and trucks segment accounts for less than 10% of the company’s valuation and we expect its international market share to remain steady around 5% throughout our forecast period.

Europe and China are the key international markets for the company and it has not been able to establish itself as a strong player in India, despite its presence in the region since 1995. However, Ford now appears to be looking at ways to bolster its presence in the region. The company is trying to strengthen its after sales service in the region, which is relatively weak compared to its key Indian competitors such as Maruti Suzuki and Hyundai. Ford is looking at reducing the cost of scheduled service and maintaining absolute transparency of billing details with customers. The company is also looking to provide better services in tier 3 and tier 4 cities in India, which do not have maintenance capabilities.  While these measures are aimed towards the smaller cars Ford sells in the region, the launch of the Mustang can be used by the company for a brand building exercise.

We believe while India can potentially become a large market for Ford in the long term.  The launch of Mustang in the region can only act as a catalyst for brand recognition. The popularity of Mustang in the region can drive sales of this model, but given the small market relative to the company’s size, it will not impact Ford’s valuation materially.

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