In 1994, Ford was one of the first multinational automakers to join our market. After 27 years, the American automaker has decided to discontinue car production in India.
It stated today that domestic car production will stop immediately, while export production will end in Q4 2021 at the Sanand facility and in Q2 2022 at the Chennai engine and vehicle factories.
However, the brand will continue to offer imported CBU models and would “significantly grow its 11,000-employee Business Solutions team in India in coming years to service Ford globally,” according to the company.
Why is Ford halting production?
Ford is plug-inspired by its production in India at Sanand and Maraimalai Nagar facilities for a number of reasons, but the main one is the unsustainable low power consumption of the facility. The two plants have a combined capacity of 4,00,000 vehicles per year, however, Ford has only been able to manufacture 80,000 in recent years, with half of those being exported.
Jim Farley, President and CEO of the Ford Motor Company claimed through the statement that Ford has amassed over $2 billion in operating losses in the last 10 years despite considerable investments in India, and demand for new cars has been far weakened compared to the projection.
Because of the low output statistics and the fact that the Sanand factory was constructed to satisfy Ford’s worldwide standards, it has been too expensive to produce vehicles for our market profitably.
In comparison, more cost-effective production was provided at the Maraimalai Nagar plant. However, it is not financially sustainable to maintain this single facility in which EcoSport and Endeavour – two of the brand’s best-known vehicles – are manufactured. This is especially true when considering Ford’s out-of-date India lineup, poor demand for its vehicles, and the absence of new mass-market models on the horizon.
Ford’s Future In India
Ford will continue to operate in India and expand its worldwide business-solutions team that supports Ford, focusing on engineering, technology and business. In addition to Ford Business Solutions, Ford India will continue engine manufacture for export through Q2 2022, according to the company’s press statement.
However, Ford claims that the changes would affect around 4000 people, and the firm will engage with employees, unions, and all stakeholders to create a fair settlement.
Existing owners will undoubtedly be affected by the decision to stop local manufacture, 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 since the network will continue to serve the CBU industry. Customer touchpoints, on the other hand, may be reduced, particularly in smaller towns.
All 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 cars like the Bronco, various EVs, and even the Ranger pickup truck, which the company had already planned to introduce in India.
Ford’s Indian Exports
By Q2 2022, Ford will have completely shut down its production plants and will no longer be producing models for export. The business will nonetheless continue to fulfill current export contracts and complete the assembly by the second half of 2022. While the automaker would no longer utilize India as a manufacturing center for exporting to other areas, it has said that it will continue to employ India-based suppliers for parts for its worldwide goods.
Was there any alternative way for Ford to stay in India?
Ford’s only realistic option for continuing to produce cars in our market was to form a partnership or joint venture (JV) with another manufacturer in India. With the formal announcement in October 2019, the American manufacturer formed a joint venture with Mahindra & Mahindra. However, on December 31, 2020, that agreement fell through. Given that the JV had been in the works for over three years, Ford had already built many of its future plans around it. This backfired badly for Ford since it would have had no new models in the foreseeable future without the JV, and the plants would have continued to be underutilized. We recently published a report on Ford’s difficult future in India, in which we examined the company’s position and alternatives in further depth.