Ford ending India manufacturing

An update on why Ford India decided to give it up in Indian passenger vehicles market

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• The story: Ford Motor Co is stopping making cars in India. The reason is it does not see a path to profitability here.
• Ford's India story: The U.S. carmaker entered India 25 years ago but still has less than 2% of the passenger vehicle (PV) market having struggled for years to win over Indian consumers and turn a profit. It is the latest automaker to leave the major growth market dominated by Asian rivals.

1. It had accumulated operating losses of more than $2 billion in 10 years in India and demand for its new vehicles had been weak.
2. Despite efforts, Ford said it had not been able to find a sustainable path forward to long-term profitability.
3. Ford's decision to cut its losses in India after leaving Brazil earlier this year underscores the pressures on global automakers to invest more in electric and automated vehicles, as well as connected vehicle technology.

• How things changed: Global automakers once fought to maintain a presence in every major market, and were willing to lose money to do so. Now, companies such as Ford, General Motors, Renault SA and Stellantis NV are walking away from money-losing ventures and redirecting capital to electrification and investment in technology they need to survive.
• Make in India: Ford's decision is a visible setback for Indian PM Modi's "Make in India" campaign. It follows other U.S. vehicle makers such as General Motors and Harley Davidson that have left India in recent years. Ford's decision was also reinforced by "persistent industry over capacity and lack of expected growth in India's car market".
• Indian market's outlook: India was expected to become the world's third-largest car market by 2020 after China and the United States with sales of some 5 million vehicles a year. Instead, sales have languished at about 3 million, still trailing Europe and Japan too. The market is dominated by low-cost, mainly small cars made by Japan's Suzuki Motor Corp. Its Maruti Suzuki brand accounts for seven of the top 10 sellers with South Korea's Hyundai Motor making the other three. Ford has been escalating investment in electric vehicles (EVs) and advanced software. In May, it said it would boost spending on EVs by a third to $30 billion by 2030. India was a lower priority now.
• As part of the plan, Ford India will wind down operations at its factory in Sanand in the western state of Gujarat by the fourth quarter of 2021 and vehicle and engine manufacturing in its southern Indian plant in Chennai by 2022. Ford has the capacity to produce about 4,40,000 cars in India a year but is only using about 25% of that. Ford said it had considered several other options for India including partnerships, platform sharing, contract manufacturing and the possibility of selling its manufacturing plants, a plan that is still under review. But Ford will continue to operate its engine factory in Sanand which exports engines for its Ranger pick-up trucks globally. It will also continue to rely on India-based suppliers for parts for its global products.
• Unhappy: India's Federation of Automobile Dealers Associations said in a statement that it was shocked by Ford's move, saying the U.S company's decision only to compensate dealers who offer vehicle services to customers as well was "not enough". There are 400 Ford outlets in India where dealers over time have invested 20 billion rupees ($272 million).
• EXAM QUESTIONS: (1) What is the general structure of the Indian automobile market? What has its evolution been like? (2) In what ways is the Indian car market evolving in terms of electric vehicles (EVs)? (3) Why do global carmakers often find it tough to operate in India? Explain analytically.

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