Ford was one of the first multi-national automotive companies to explore the Indian market. Beginning from 1994, for the next 27 years, the company had become a rather popular name in the Indian market. But the company is now announcing its plans to stop the production of its cars and SUVs in India. Production of vehicles for local sale will be stopped immediately. The export business will also be wrapped up by Q4 2021 and the Chennai engine and vehicle plants will be shut down by Q2 2022. The company has clarified that it will go on with selling imported CBU models and that it will increase its Business Solutions team in India to support the company in the global market.
Ford’s decision to shut down its manufacturing activities in India at the Sanand and Maraimalai Nagar factories is due to a multitude of reasons, the most important of which being that facility capacity utilisation has been unsustainable. The two plants have a combined capacity of producing 4,00,000 units per year, yet Ford has only been able to bring out 80,000 cars (20 percent of capacity) in recent years, with half of those being exported.
Despite large investments in India, Ford has accumulated more than $2 billion in operating losses over the last ten years, and demand for new vehicles has been far lower than expected, according to Jim Farley, president, and CEO of Ford Motor Company.
Because of the low output figures and the fact that the Sanand facility was built to satisfy Ford’s global standards, it has been too expensive to produce cars for Indian market profitably.
The Maraimalai Nagar factory, on the other hand, allowed for more cost-effective manufacturing. Even to maintain this one factory, which produces the EcoSport and Endeavour, two of the brand’s most popular models, Ford finds it financially unfeasible. This is especially true when considering Ford’s out-of-date India lineup, poor demand for its vehicles, and the popularity of new mass-market models on the horizon.
Ford will maintain a presence in India and will expand its business solutions team to service Ford globally. The team will focus on engineering, technology, and business operations, as previously announced. Ford also stated in their press statement that India will continue to employ the company’s second-largest salaried workforce internationally. Also, in addition to Ford Business Solutions, Ford India will continue to manufacture engines for export until Q2 2022.
However, Ford claims that the changes would affect roughly 4000 people, and the firm will engage with employees, unions, and all stakeholders to negotiate a fair settlement. Existing owners will undoubtedly be affected by the decision to stop local production, but Ford has stated that it would continue to provide full servicing, aftermarket parts, and warranty support. Dealers will be open for business as well, as the network will continue to serve the CBU industry. Customer touchpoints, on the other hand, maybe reduced, particularly in smaller towns.
Everything is not lost for Ford fans, as the company plans to focus on importing specialized models in the future, similar to what it does in Australia and Brazil. This means Ford might bring in models like the Mustang, which it recently announced, as well as other vehicles like the Bronco, other EVs, and even the Ranger pickup truck, which the company had already planned to offer in India.
By Q2 2022, Ford will have completely shut down its production plants and will no longer be producing vehicles or engines for export. However, existing export orders will be fulfilled, and all assembly will be completed by Q2 2022. While the automaker would no longer use India as a manufacturing hub for exporting to other regions, it has stated that it will continue to employ India-based suppliers for parts for its global goods.
Ford’s only realistic option for continuing to produce cars in our market was to form a partnership or joint venture (JV) with another carmaker in India. With the official announcement in October 2019, the American carmaker formed a joint venture with Mahindra & Mahindra. However, on December 31, 2020, that deal fell through. Given that the JV had been in the works for almost three years, Ford had already built many of its future plans around it. This backfired heavily for Ford, as it would have had no new models in the foreseeable future without the JV, and the plants would have continued to be underutilized.
