The automaker Ford explained its decision to shut operations and factories in India was driven by mounting losses — of approximately $2 billion.
In October 2019, Ford and Mahindra announced a joint venture that would see the American automaker end independent operations in India and Mahindra acquiring a majority stake in the American carmaker’s operations here. It seemed that despite its continued struggle to achieve a decent market share here, Ford had finally figured out how to go about operating in India. However, by the end of 2020, the two carmakers decided to end the joint venture for multiple reasons. Okay, trouble is definitely on the horizon, but nothing that a seasoned carmaker could not handle. Fast forward to 9 September 2021, when Ford decided to end its operations in India. What this means is that Ford will cease to manufacture cars in India, i.e. it will shutter its plants in Chennai as well as Sanand. The automaker explained the decision was driven by the mounting losses — of approximately $2 billion. While the loss is decidedly substantial, is it the only reason for Ford’s not-exactly-surprising exit from India? Not exactly. While the matter and decision is definitely complex, we try to break it down for you
- According to an ET report, industry experts pointed out Ford had a sub-standard poor product pipeline in India, which used under 20 per cent of the company’s manufacturing capacity in the country. That is not all though; the company’s exports from India were declining as well. Unfortunately, Ford did not appear to have a Plan B to deal with the issues that kept it from achieving a decent market share here.
- Another factor that exacerbated Ford’s struggles in India was the lack of products aimed at every segment in the country’s automotive market. And of the cars it did offer here, only a select few names managed to make somewhat of a difference: Ford Ikon, Ford EcoSport, and Ford Endeavour.
- Don’t think the Ford Mahindra JV was not at play here; after the break-up with Mahindra, Ford’s top bosses were convinced there wasn’t a leader at Mahindra who could capably navigate the complexities of an international JV.
- Ford just did not have the volume; the company sold a meagre 48,042 units, including exports, in 2020-21. In the same duration, Maruti Suzuki sold about 1.1 million units. As you can imagine, this severe lack of sales practically rendered Ford’s ₹2,000 crore investment in its dealerships and service centre network here pointless.
- Meeting CAFE and other upcoming stricter emission norms would require Ford to make a sizeable investment. But increased losses in India made it difficult for the American carmaker to do that.