Ford follows other automobile companies to halt production in India; here’s why

Last Thursday, Ford said that it will halt productions at both its plants in India, namely, Sanand in Gujarat and Chennai in Tamil Nadu

By Mohammed Baleegh

Following the suit of a handful others, US-based automobile firm Ford Motor last week became the latest automobile company in announcing its production halt in India. 

Last Thursday, the company said that it will halt productions at both its plants in India, namely, Sanand in Gujarat and Chennai in Tamil Nadu, the move that jeopardizes the future of 4,000 employees. Authorities cite heavy losses in the last decade as a major reason for its exit.

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In a statement, the company said: “Ford India will cease manufacturing vehicles for sale in India immediately…[the company] will wind down vehicle assembly in Sanand by the fourth quarter of 2021 and vehicle and engine manufacturing in Chennai by the second quarter of 2022.”

Ford Motors is one of the first automobile companies to have entered the Indian market after the liberalization of the economy.

Why the exit?

The Indian Express reported that the company incurred a loss of $2 billion in the previous decade. Besides, deliberations regarding the transition of power to its local competitor Mahindra and Mahindra broke off.

Here are major reasons which led to closure of Ford in India:

Diminishing demand:  Ford cited the accumulation of losses worth $2 billion over the last decade because of the dip in the demand for its new vehicles. “Despite (our) efforts, we have not been able to find a sustainable path forward to long-term profitability” said Anurag Malhotra, India head for Ford Motors.

Low-cost cars:  India’s car market is ruled by manufacturers like Maruti Suzuki India and Hyundai Motors India, which have focused on the middle class consumers and produced affordable products. While Hyundai and Ford entered the Indian Market at the same time during the 1990s, both have had contrasting fates.

Failed joint venture efforts: Ford Motors initiated discussions with India’s Mahindra and Mahindra but they failed to break the deadlock, which could have helped Ford to create affordable cars.

Ford Motor has now joined Harley Davidson and General Motors as firms who have left India in the last five years. Other companies to halt productions in India include MAN Trucks, UM Motorcycles and Honda Cars, as reported by the Business Insider in February 2021.

Not the end yet

As per the report from The Hindu, Ford Motor is not looking to exit India for good, since it plans to concentrate on its “Ford Business Solutions” to erect “sustainably profitable” businesses here.

Also, speaking to siasat.com Masiuddin Ahmed, GM of Ford in Hyderabad said: “There is no dearth in demand for Ford cars at present. The Ford Ecosport and Ford Endeavour are still in high demand, each of these cars currently has a waiting period of four months.”

Besides, the US automaker stated that it will continue to sell some of its high-priced cars in India (Mustang and Endeavour) through imports and it will also provide support to dealers to service existing customers, NDTV reported.

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