Why Ford is shutting manufacturing plants in India

Ford's shutdown follows two other American auto giants, Harley Davidson and General Motors

Ford India on Thursday decided to shut down its manufacturing in India after incurring losses that run in billions of dollars due to its failure to capture the market and sustain a decent tab on sales.

Ford follows suit of two other American auto giants, Harley Davidson and General Motors, who staged a departure from India in recent years. Reports indicate that Ford's exit was imminent as they failed to establish a profitable business in their 25-year presence in India.

The automaker's move is set to impact 4,000 employees, while the company said the services facilities will continue unchanged.

Under Ford's CEO Jim Farley, the automaker has taken some bold decisions to keep up with other players in the extremely competitive market. Their India move follows Brazil, where they shut operations earlier in the year.

Failure to find a co-driver

Ford's production had dropped to nearly 25 per cent of over 4,40,000 cars it can roll out from its two plants, located in Sanand and Maraimalai Nagar. Thus, they needed a partner to share the capacity with in order to cushion the heavy operation costs, which is among the key reasons behind the company's exit.

Also read: Ford India's staff, dealers left in lurch as company to shut plants

Though Ford has reached out to various companies over the years, prominently Mahindra & Mahindra came close to a deal. However, without any breakthrough there, the automaker's goal of 8 per cent operating profits by 2023 seemed unviable, The Economic Times reported. The company reported $2 billion in operating losses over the past decade.

Place in market

Despite their over two-decades-long presence in the country, Ford only managed to capture as little as 2 per cent of the market that is dominated by its Asian rivals. The brand was criticised for shortcomings in several aspects, such as the pricing and lack of a diverse range of models.

Ford India chief Anurag Mehrotra said the company decision was also reinforced by "persistent industry over capacity and lack of expected growth in India's car market".

India was expected to grow into the third-largest market for vehicles by 2020, behind the US and China, Reuters reported. But the country managed only 30 lakh cars against the projected 50 lakh.

The Indian market has also been long dominated by Maruti Suzuki, with their low-cost wide vehicles spanning nearly every segment. Among the top 10 sellers in the country, seven cars wear a Suzuki logo, followed by three Hyundais.

The Covid-19 pandemic that affected automakers worldwide also compounded Ford's struggles, with the company selling 2,790 units in June this year, compared to 2,872 units in June 2020.

With Agency inputs.

Watch latest videos by DH here: