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Ford India exit: Who is affected and who gains?

Ford India Exit

Image Source: Onmanorama

Earlier this month, Ford India Private Ltd announced that it will cease vehicle assembly in Gujarat’s Sanand plant by the fourth quarter of 2021, and vehicle and engine production in Chennai by the second quarter of 2022.

Ford, on the other hand, has decided to pull out of India after just 25 years of operations, which is not long for an automaker. It’s not like Ford had an easy time during those years, despite producing iconic cars like the Model T, Thunderbird and Mustang. While some of its models in India, such as the Ikon, Endeavour, and EcoSport, were huge successes, others, such as the Mondeo and Fusion, were less successful. More than $2 billion (Rs 14,600 crore) in operating losses had been recorded by the company, and the demand for its vehicles was weak. The company, according to Ford India CEO Anurag Mehrotra, could not find a path to long-term profitability.

Who stands to gain from Ford?

They said that Ford’s exit will assist companies in the utility vehicle industry. India was a key market for Suzuki Motor of Japan, and Hyundai Motor made India a global production base for small automobiles. According to Vahishta Unwalla, Lead Analyst-Industry Research Team, Care Ratings Ltd, the exit of Ford India will assist companies in the utility vehicle industry such as Maruti Suzuki, Hyundai Motor, Kia Motors India Pvt Ltd, and Tata Motors Ltd.

“However, competitors like Maruti Suzuki India Ltd increased their market share in the utility vehicle class from 12.4% in FY2015 to 21.6 percent in FY2021. Hyundai Motor India Ltd also increased its market share from 0.3 percent in FY2015 to 20.2 percent in FY2021. As a result, Ford has not been successful in acquiring or maintaining market share “Unwalla added to the mix.

To What Extent Will It Affect Ford employees?

Workers want the Tamil Nadu government to either assist with the smooth transfer of the company to another firm along with the employees or arrange them for substitute employment. It was announced in a letter sent to Ford employees that the company would discontinue car production in Chennai and Sanand by the end of 2021 and that it would phase out export automobiles at the Sanand factory by Q4 2021 and engine/vehicle assembly plants in Chennai by Q2 2022. For the time being, Ford will continue to produce engines for export.”

The news came as a shock to many, especially the personnel who were anticipating to return to work when the supply of semiconductors had been replenished. Over 40,000 direct and indirect workers, including dealership employees, are expected to lose their employment as a result of Ford’s decision to shut down its vehicle manufacturing operations, including at least 2,700 workers in Chennai, according to Ford Workers’ Union data. As a result of its intentions to bring some of Ford’s famous global vehicles and electric SUVs to market, the company aims to grow its Chennai-based Ford Business Solutions team, it added.

For parts for its global goods and suppliers, Ford, on the other hand, has stated that it will receive assistance from Indian vendors. For the future of the workers, however, this is not the case. Ford in Chennai is a major supplier of auto components, leather, and tyres to a large number of small and medium-sized enterprises (MSMEs), and they will all be affected.

Effects on the Used Car Industry

An expert on used cars in India, Mahindra First Choice Wheels Ltd (MFCWL) MD and CEO Ashutosh Pandey, said: “However, the discontinuation of a major player in the industry has an impact on used car prices. Potential consumers are concerned about the availability of components, the service network, and assistance from the OEM. It’s hard to estimate the price decline, but it may be anywhere from 5-10%, depending on market conditions.” In addition to CarTrade and Cars24, we reached out to other reputable used car retailers, but they declined to comment.

Aside from discontinuing local production, Ford has made it quite clear that it would continue to provide after-sales services and spare parts for its clients. Dealers no longer provide sales and service, but they will now provide parts and service support for Ford vehicles. Ford will also continue to market the Mustang, a fully imported vehicle, and wants to import more worldwide vehicles via the CBU (completely constructed unit) route. Ford would also maintain its parts depots in Delhi, Chennai, Mumbai, Sanand, and Kolkata, as well as its distribution centres in Bangalore and Hyderabad. The company will remain in India for the foreseeable future. There is no need to worry about parts and service availability when purchasing a used Ford vehicle.

Ford’s pullout will not harm investor sentiment

On Friday, a senior Indian government official stated that the company’s decision to leave India is not likely to damage investor sentiment because it was made for operational reasons, not because of the business climate in India

More than $35 billion has been invested in India during the last six years, including $4.4 billion from 13 new companies, according to the official. Examples include an $820 million investment by Toshiba-Suzuki-Denso to start prototype production of advanced chemical cell battery storage manufacturing in Hansalpur, Gujarat, and a $550 million investment by US-based lithium-ion battery producer C4V in Karnataka.

Also, read: Ford Stops production in India

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