Ford Admits Defeat, Announces Closure of Indian Manufacturing Plants
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It is fair to say that Ford has had a mixed year. The company’s bottom line has taken a massive hit due to the semiconductor chip shortage, which has seen new car production halted.
The ensuing sales drop has been worse than expected, but Ford can take some solace in the fact that almost every major automaker is experiencing the same problems.
Additionally, Ford’s new models have been generally well received, and its initial foray into the electric car market has also been successful, with F-150 Lightning preorders coming at the expense of rival automakers.
Just last week, however, Ford released a statement outlining its plans to stop making cars in India, one of the largest car markets in the world.
According to reports, Ford will close both of its manufacturing plants, which are located in Gujarat and Tamil Nadu, by the second quarter of 2022.
Why is Ford closing Indian manufacturing plants?
Reported by the BBC, Ford has been making cars for the Indian market for the past 25 years, but has struggled to compete with domestic auto brands.
Ford’s problems in India have worsened over the last 10 years, with the company running up operating losses of more than $2 billion.
On top of this, Ford announced that Indian demand for new vehicles has weakened during the pandemic, and following disappointing sales in the U.S, the company is looking to pool its resources into improving sales back home.
The closure of the Indian plants means Ford will cease production of models intended for the Indian market, but the company will continue to provide maintenance services, parts, and warranty support to existing customers.
Competition too stiff for American automakers
Ford is not the first American car maker to leave India. In 2017, GM decided to stop making cars there, and in 2020, Harley-Davidson pulled out too.
The Harley-Davidson retreat was surprising, because India is the world’s biggest motorcycle market, but as with Ford, Indian companies successfully squeezed out the American models.
While Ford is often praised for the affordability of its vehicles in the U.S., it has a market share of less than 2% in India, and is considered a flashy and expensive brand.
Ford ranks ninth in the list of India’s biggest auto manufacturers, far behind Indian giants Mahindra & Mahindra and Tata Motors.
In fact, the only foreign players to have real success breaking into the Indian car market have done so as part of a joint venture with Indian companies.
Maruti Suzuki India, Hyundai Motor India Limited, and Toyota Kirloskar Motor Private Limited are all successful examples of car makers working cooperatively with Indian brands, something American companies have been unwilling to do.
Ford’s withdrawal is more bad news for Modi
Ford’s decision to close down its Indian plants is bad news for the 4,000 Indian employees who stand to lose their jobs.
It is also bad news for Indian PM Narendra Modi, who promised major foreign investment under his leadership, especially from U.S. companies.
While Modi’s friendship with former President Trump suggested American investment could be on its way, Indian news reports have since characterized the relationship as toxic, and not one that benefited them in any tangible way.
A recent poll suggests just 24% of Indians considered Modi "best-suited" to be India's next prime minister, a staggering drop from 66% just 12 months earlier.
While Ford’s decision to leave India makes good business sense in the short and medium term, it remains to be seen if it can ever be tempted back.
Some commentators suspect American car makers are confident of making a larger dent in Indian market share once electric vehicles begin to take off over there, with U.S. companies further along than their Indian counterparts when it comes to EVs.