Ford was one of the first foreign auto giants to enter India back in the 1990s. The Escort was its first car launched in the country in a venture with the Mahindra Group. Its first solo model, the Ikon ,followed in 2001. Two decades later, the US car maker is shutting down its manufacturing plants here, having been unable to make a huge dent in the country’s automobile market.
Ford is the third US automaker to cease local production following the exit of rival General Motors and super bike maker Harley Davidson. The latter now has a deal with Hero MotoCorp, the country’s largest two-wheeler maker, to sell its motorcycles here.
Market share woes
India’s car market is dominated by Japan’s Maruti Suzuki and Korean Hyundai. New launches in the last 2-3 years have helped homegrown Tata Motors climb to the third spot. Even newer companies like Kia have found good traction here. However, Ford, despite some good products like the Ecosport, has struggled over the years. The company has two manufacturing plants here—one at Sanand, Gujarat and the other in Chennai. However, reports suggest it was operating at just 20 per cent of its total installed capacity.
According to latest data from Federation of Automobile Dealers Associations (FADA), over 2.53 lakh passenger vehicles were sold in India in August. Maruti Suzuki remained the top company selling 108,944 vehicles and had a market share of 43 per cent. Ford India sold just 3,604 vehicles and had a market share of just 1.42 per cent.
“Despite investing significantly in India, Ford has accumulated more than $2 billion of operating losses over the past 10 years and demand for new vehicles has been much weaker than forecast,” said Jim Farley, the president and CEO of Ford Motor Co.
The winding down process
Inside a Ford manufacturing plant in India | Reuters
As part of the winding down plans, Ford will stop manufacturing vehicles for sale in India immediately. The production of vehicles that are meant for export markets will be wound down by the fourth quarter of 2021 at the Sanand plant. The Chennai engine and vehicle assembly plants will stop production by the second quarter of 2022.
Ford says it took these restructuring actions after exploring several options, including partnerships, platform sharing, contract manufacturing with other firms, and the possibility of selling its manufacturing plants, which is still under consideration.
“Despite these efforts, we have not been able to find a sustainable path forward to long-term profitability that includes in-country vehicle manufacturing. The decision was reinforced by years of accumulated losses, persistent industry overcapacity and lack of expected growth in India’s car market,” said Anurag Mehrotra, president and MD of Ford India.
In 2020, Ford and Mahindra and Mahindra had announced plans to join hands for a second time. That would have rejuvenated Ford. However, the COVID19 pandemic upended these plans and the venture was called off earlier this year.
Road ahead for Ford in India
Once the existing inventory is sold, Ford will stop sales of the current portfolio, which includes the Figo hatchback, Aspire compact sedan, Ecosport compact SUV and the Endeavour SUV. Ford says it will continue full customer support operations for these vehicles with service, aftermarket parts and warranty coverage.
After production ends, Ford will begin importing and selling vehicles such as the Mustang coupe and Mustang Mach-E.
“As part of our Ford+ plan, we are taking difficult but necessary actions to deliver a sustainably profitable business longer-term and allocate our capital to grow and create value in the right areas,” said Farley.
Ford says it will focus on growing the Ford Business Solutions capabilities and team in the country. With more than 11,000 team members currently in India, Ford Business Solutions plans to expand to provide more opportunities for software developers, data scientists, research and development engineers, and finance and accounting professionals, to transform and modernise Ford globally, it added.
Jobs on the line
Even as Ford will grow the business solutions business, the auto restructuring is still expected to affect around 4,000 Ford employees.
Ford says it will maintain a smaller network of suppliers to support engine manufacturing for exports. It will also continue to rely on India-based suppliers for parts for its global products.
Vinkesh Gulati, the president of FADA said the auto retail fraternity was shocked by Ford’s announcement. He said the Ford India MD has assured the company will adequately compensate dealers who continue to offer vehicle service. While it is a good beginning, Gulati said it was not enough.
He pointed that there are 170 dealers who in turn have 391 outlets and have invested Rs 2,000 crore for setting up their dealerships. These dealers employed around 40,000 people.
Indian market a tough nut to crack
India offers a huge growth potential for any auto maker, given the low penetration, compared with many other developed as well as developing markets. However, the market is dominated by small hatchbacks and now increasingly compact SUVs. In comparison, in the United States, the home market of Ford and General Motors, it is the big SUVs, pickups and large sedans that have always been a mainstay.
To compete with the economical Japanese and Korean car makers like Maruti Suzuki and Hyundai has always been tough. Even the European car giant Volkswagen has had to redraw its plans in India and has now embarked on a renewed push with a product portfolio built on a new tuned for India platform. Companies like Renault too have launched India focused products in a bid to gain traction locally.
Even as Ford and General Motors have shut down local production, the under penetrated market is also attracting new players. Kia entered the market in 2017 and its Seltos and Sonet SUVs have found good traction. It was followed by MG Motor, a subsidiary of China’s SAIC, which set up shop the same year. The MG Hector too has found many takers. Citroen launched its first product in the country earlier this year. Electric car maker Tesla too has plans to enter India.
