Ford Motor Company was one of the first carmakers to enter India’s market after liberalization in 1991. And now it is the latest one to leave the market in terms of local production.
According to the American company, it had suffered losses exceeding $ 2 billion over the past 10 years and that approximately 4,000 workers would be affected by the gradual closing of its production units in Sanand (Gujarat) and Chennai (Tamil Nadu).
Ford joins an increasing number of global vehicle manufacturers that have stopped operating in the fourth-largest automobile market in the world over the past five years. Ford’s American rival General Motors (GM), and Harley-Davidson, an American motorcycle company, are also included in that list.
Ford’s announcement was made months after Mahindra & Mahindra had abandoned plans to transfer operations to the local rival. Ford India was also said to have been in discussions with Ola, a mobility tech company, about the latter’s plans to produce electric scooters. However Ola eventually decided to set up its own gigafactory.
The Dearborn, Michigan-headquartered auto major’s two plants in India have an annual manufacturing capacity of 400,000 units, but lately it had been operating at a utilisation of 20 per cent, half of which was being exported.
Ford held a share of 1.4% in August’s Indian market. This is due to Maruti Suzuki, Japan, and Hyundai Motor, South Korea, which together hold more than 60%.
Ford India stated that it will continue to sell CBU (Completely Built Up Unit) models and would “significantly increase its 11,000-employee Business Solutions group in India in the coming years to support Ford worldwide”.
Jim Farley, President and CEO of Ford Motor Company stated that “as part of our Ford+ strategy, we are taking difficult, but necessary, actions to deliver a sustainable profitable business longer-term, and allocate our capital for growth and value in the right places.”
He stated that Ford had accumulated more than $ 2. billion in operating losses over the past ten years despite having invested heavily in India and that demand for new cars has been lower than expected.
GM sold its Halol, Gujarat manufacturing unit to Great Wall Motors in China in 2017 and its Talegaon facility in Maharashtra to them.
GM ended sales in India after mounting losses and negligible sales.
Harley-Davidson announced in September that it had closed its Bawal, Haryana production plant and “significantly reduced” its Gurgaon sales operations.
Ford stated that it will cease making vehicles for sale in India. The Sanand vehicle assembly plant will cease manufacturing for export by October-December 2021 and the Chennai engine assembly and vehicle plants by April-June 20,22.
Ford’s decision comes as industry leaders are concerned about slowing consumer demand, high fuel prices, and the impact of high taxes on the sector which is currently transitioning to an electric future.
The statement stated that more than 500 people work at Sanand’s engine plant. This produces engines for export to the Ranger pickup truck. There are also about 100 employees who support parts distribution and customer service.
Last month, the Society of Indian Automobile Manufacturers (SIAM), held its annual convention. Top executives from vehicle manufacturers raised concerns about rising fuel prices and high taxes.
“The industry has seen a slower growth rate over the past 18 months… I have not seen any concrete action to reverse the decline. There have been many statements about the importance and importance of the automobile sector. R C Bhargava, chairman of Maruti Suzuki, stated that he doesn’t believe the automobile industry will be revived with ICEs or CNG, biofuels, or EVs unless there is a solution to the affordability issue for consumers.
Venu Srinivasan, chairman of TVS Motor Company, stated at the convention that “the basic mode of transport for the country” is being taxed at 28% GST. This is the same as a luxury product. Would you like to know if we are being recognized? Are the contributions of the automotive industry to employment, revenues, and foreign exchange earnings being recognized?
Ford stated that it will begin importing and selling premium and electric vehicles from India. Sales of existing products, such as Figo and Aspire, Freestyle and EcoSport, would cease when all dealers have been exhausted.
It stated that it would collaborate with employees, unions and suppliers in Chennai and Sanand to develop a fair plan to minimize the negative effects of the decision. It said it would increase its Indian 11,000-employees business solutions team, which includes software developers, data scientists and R&D engineers as well as finance and accounting professionals, in the next years.
Ford is preparing an electric vehicle strategy worldwide. It plans to invest $ 22 Billion through 2025 and electrify its existing products like the Mustang, F-150 and Transit. Ford also stated that hybrid and fully-electric vehicles such as Mustang Mach-E will be made available in India.
Ford’s EV strategy is primarily focused on North America, Europe and Asia. It is also partnering with Volkswagen and other carmakers in Europe for markets Ford does not have scale.
Despite India’s difficult auto market being described, Hyundai subsidiary Kia Motors (China’s MG Motor) and India’s MG Motor have made substantial inroads over recent years.
(Adapted from IndianExpress.com)