Here’s why automobile giants are exiting India
On 9th September 2021, American carmaker ‘Ford’ announced its departure from the Indian market. This means that Ford India will be shutting down its operations in India, which includes the domestic production of its cars. But the company will continue to manufacture the export vehicles till 2022. Nevertheless, despite the company’s exit, Ford is assuring to provide all sorts of aftermarket support to the customers in the country.
Over the past 3-4 years we’ve seen many renowned automobilegiants wrapping up their business from India, including Harley Davidson, Chevrolet, Fiat and more. With Ford also leaving India, there has to be a concrete reason. So, let’s find out!
During the presence of Ford in the Indian market, the company had invented many resources including time and money.
- But, in the past decade (10 years), Ford has registered a loss of more than $2 billion.
- There is no concrete evidence in India now that the demand for new vehicles may increase.
- Hence, they had to take difficult but necessary steps to sustain the profitability, considering this business for the long term.
Why the decision to exit?
Considering the Indian automotive market we think, it was unfair for Ford to sustain in such an unpredictable situation.
- To begin with, they witnessed a massive loss of more than $2 billion dollars.
- The cost of non-operating assets in 2019 was like a sledgehammer hitting a thin pane of glass. This costed company $0.8 billion just in 2019.
- Next, the poor sales of cars were further escalated by the situation caused by the COVID-19 pandemic.
- This also translates to poor export numbers, many vehicles are manufactured in India and are exported to other countries. Again this is what was still keeping Ford in the domestic automotive market.
- Now, let’s get clear with numbers. In 2020 June, Ford sold about 2,872 cars but in June 2021, the tally was a lower 2,790 units.
- Moving on, Ford’s exit could also relate to the broken joint venture between Ford and M&M (Mahindra and Mahindra). This was something that was planned in October 2019 but was shelved in January 2021.
Any JVs in line?
After the failed partnership with Mahindra and Mahindra, Ford was trying hard to keep its operations in India. Well, Ford surely was planning a long game in India, as they had planned a couple of new launches in India.
But sadly all of this went in vain. Still, sources say, Ford was earlier considering Hyundai Motors, Tata Motors, Skoda-Volkswagen group, Ola Electric and even some new EV startups for a venture. But, nothing eventually worked out.
So what’s next?
So, Ford is shutting its domestic operations with immediate effect in India. But, the company shall continue manufacturing cars for some international markets.
- This means, their manufacturing facility in Maraimalai Nagar, Chennai will be functional still the second quarter of 2022.
- Whereas the other in Sanand will be operational till the fourth quarter of this year.
- Both of the facilities are responsible for manufacturing cars as well as engines for export.
- However, because the company of pulling the plug on domestic manufacturing, about 4,000 employees will lose their jobs.
- Taking the stress off, from the Indian customers, Ford will provide aftermarket services and support.
- Ford will also work in tandem with the dealers in Chennai, Mumbai, Delhi, Sanand and Kolkata to maintain the flow of spare parts.
- The American carmaker Ford still considers India as a large market, hence it will bring the vehicles via the CBU and CKD route.
- This is where Ford is planned to bring multiple hybrids and electric vehicles to India, which also includes the Mustang Mach-E.
Well, this marks the end of another reputed automaker to sail from the Indian shores. You will be dearly missed, FORD!
TEJASWINI PAGADALA is an independent communications consultant. She has previously worked with the Andhra Pradesh Chief Minister’s Office as the Communications Officer where she has written English speeches for the CM, managed English media communication from the CMO and handled social media accounts of Andhra Pradesh Chief Minister and the Government.