ford india

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Ford had entered the Indian market around 25 years ago, and now, in 2021, they have decided to leave the country and stop manufacturing vehicles there. What led to this decision and why did they have to make it? Well, let’s say that there are several factors at play here. Ford had a lot in mind while making the decision to leave India and you can say that they are somewhat justified. Looks like Indians won’t be getting the Ford Bronco anytime soon. Well, not at un-imported prices anyway. 

For starters, Ford stopped making cars in India because it took a major hit of about $2 billion. They have made it clear that they do not see a way in which they can make vehicles in the country and still remain profitable. They are not the first ones to do so, as GM and even Harley Davidson have exited the country after they incurred losses and also did not see a way of profitability in the country. 

Even though Ford has been in the country for over 2 and a half decades, they have less than 2% of the total passenger vehicle market. Why? Well, the answer is simple. Indians prefer a cheap and reliable method of transportation. They don’t care about specs and features and are least concerned about other factors. They just want a dirt-cheap way of transporting from point A to point B. Ford’s cars just don’t cut it. They are very good cars, of course, but Indians fail to see that as they only chase affordability. That is an issue in a developing country where the average salary is lower than that in a developed country. 

That is why Asian carmakers are actually the most popular in India. The most popular car brands in India are Maruti Suzuki, Hyundai, Tata, Mahindra, and Kia. These are all Asian brands and some are Indian. Maruti Suzuki claims the top spot as the most popular brand and seven of the ten best-selling cars are actually from them. 

This led to Ford not getting much of the attention in the country, despite them trying to develop and manufacture cars at a reasonable price. Over 10 years, Ford has incurred a loss of $2 billion in India, and not a whole lot of people are interested in the new vehicles that they have to offer. 

Ford India head Anurag Mehrotra said that despite their efforts, they have not been able to find a sustainable and profitable path forward in the light of which they could continue in the country. Ford did not only cut India off, as they also have cut Brazil off in early 2021. 

However, with the onset of COVID and the economy being shaken up, things have changed substantially for automakers. With the pressure of electrification in the US weighing down on these companies, they are willing to spend more money on research and development of electric vehicles rather than losing money in countries like India. Times have changed and priorities have changed for them too. That is why Ford and GM took the decision to leave India

Also affecting the decision is India’s PM Narendra Modi’s “Make in India” campaign, which focuses on promoting companies and businesses that are Indian. This, unfortunately, was also one of the factors why Ford decided to leave India. 

If a carmaker does not see promise in the market, there is no point in staying. Ford is not really popular in India at all. They had stayed in India all these years because they believed that the Indian market had a potential for growth that was unrivaled by many other countries. They believed that India would be the world’s third-largest car market by 2020, only behind China and the US. Unfortunately, that did not come to fruition as the Indian market was only able to muster sales of 3 million vehicles per year. But the projected rate was around 5 million vehicles sold per year. 

As already mentioned, people in India prefer cheap and affordable means of transport. Also, bikes and motorcycles are most popular, as they cost less and also suffice for local transportation. People in major cities and rural areas would rather take the local transport than owning a personal car. All of this is because the average income is quite low as compared to other developed nations.   

Even Ford’s CEO, Jim Farley, made it very clear that they intend on utilizing their capital on the EV market. They do not wish to spend any time in a country where they are not making any profit. He clearly stated that India was a “low priority”. And his decision is understandable. You cannot hope to thrive in a country like this when you need to pioneer electrification in your own home country. 

Ford had a factory in Sanand in Gujarat, India. They are expected to completely exit the country within the fourth quarter of 2021. Ford also has a factory in Chennai, Tamil Nadu, and they expect to leave it around 2022. However, that does not mean that Ford will completely shut the factories down. The factories supply engines for the Ford Ranger worldwide and Ford will continue to make use of the Sanand factory for that purpose. The factories are being underworked and under-utilized. That’s why, they are finding a way to escape. 

Also, the Indian giant carmaker Mahinda and Mahinda, was expected to form a joint venture that probably would have made it easier for Ford to manufacture vehicles at a lower cost in India. However, that also did not come to fruition and Ford had no choices left.

Ford might also look forward to selling its manufacturing plants altogether. However, the ones who will be hit the hardest are the dealers. Ford was looking to open new dealerships even 5 months ago. However, since they are dealing, the dealers will now be left stranded. Dealers are expected to have spent around $272 million in the 400 outlets of Ford in India. However, with the “shocking move by Ford”, as the Indian Federation of Automobile Dealers Associations put it, the dealers and a lot of employees would now find themselves without any job.

(guest article)

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