Ford ceasing local manufacturing is a major blow to Indian automotive industry, says GlobalData

Following the news that automaker Ford announced to shut down both its vehicle manufacturing factories in India;

Bakar Sadik Agwan, Senior Automotive Consulting Analyst at GlobalData, a leading data and analytics company, offers his view:

“Ford has reportedly decided to bring the final curtain down on its presence in India with the announcement of ending its vehicle manufacturing role and ‘ramping down’ production of its top selling models in India. The exit is a major blow to the Indian automotive industry which marks the end of the company’s three-decade long presence in the country.

“The development follows speculations made by several industry insiders and company’s statement that it is evaluating ‘alternatives’ and ‘reassessing’ capital allocation for India a month ago.

“The blue oval did some major business restructurings so far this year including ‘end of production’ in Brazil as it aims to focus on profitable markets and the must-have electric vehicles (EVs). India happened to qualify the criteria and hence the local operations was speculated to have same fate after Ford’s fall out with Indian automaker Mahindra. The company’s individual operation was losing ground to hefty losses, asset write offs and decline in sales volume for the past few years. Partnership/collaboration would have been the last resort for Ford to continue its operations smoothly which ultimately failed.

“Ford now joins the league of American auto giant General Motors (GM) which had a similar fate in India. However, a lesson learnt from GM, Ford announced a complete production shut with deadlines at both its location facilities – unlike GM which kept the production running several years for exports which eventually came to an end in 2020.

“Ford plans to first end production at Sanand plant by Q4 2021, followed by Chennai plant in Q2 2022. Till then, the company will continue ‘limited’ production for local market and clear its pending global orders. However, the company would retain its engine plant in Sanand.

“Though Ford announced to continue selling its niche products – Mustang and Endeavour, the exit will significantly plunge sales volume with immediate effect and adversely affect 4,000 jobs and its country-wide dealership network.

“While COVID-19, economic woes, hampered consumer sentiments and major regulatory reforms are to be blamed for Ford’s decline. The company was also losing ground to newer competing automakers and slow product cycle. It’s recent strategies such as price promotions, face-lift upgrades, launching automatic variants failed to lure Indian customers. Ford was the pioneer in the sub-compact SUV segment and disrupted the Indian market with its EcoSport. However, despite being technically competent and ‘deserving’, the company’s vehicles lost their charm in India.

“The exit is an ‘alarm’ for other foreign automakers in India. The market does not stand still in India, or indeed anywhere, and the companies will need to work strongly on their strategic priorities to make a difference in India.”

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