The Ford Motor Company was among the first international automotive companies to enter the Indian market in 1994. 27 years after the company began producing cars and SUVs in India, the American company has decided to stop production. The company announced that the company will cease manufacturing vehicles for local sale, while Chennai’s engine and vehicle plants will cease production by the end of 2021, and the Sanand facility will cease production by Q4 2022. Nonetheless, it is still planning to sell imported CBU models through a Business Solutions team of more than 11,000 people in India to support Ford globally.
What is the reason behind Ford ceasing production?
A number of factors led Ford to suspend its manufacturing operations at its plants in India, but the main reason is the underutilisation of the capacity at the plants. It has a combined production capacity of 4,000 vehicles per year but has only been producing 80,000 units recently (20 percent), half of which are exported.
President and CEO of Ford Motor Company, Jim Farley said, “Despite heavily investing in India, Ford has accumulated operating losses of more than $2 billion over the past decade and demand has been far lower than anticipated”. Despite the low output figures, the Sanand plant has been too costly to make cars for our market profitably due to its original construction for Ford’s global standards.
However, the facility in Maraimalai Nagar did offer a more cost-effective manufacturing option. Although maintaining this single plant, where the brand’s two most popular models – the EcoSport and Endeavour – are made, isn’t feasible. A large part of this may be due to Ford’s ageing India lineup.
What is Ford’s future in India?
The Ford Business Solutions team will focus on engineering, technology, and business operations. As announced, Ford will continue to have a presence in India. According to its press release, Ford will maintain its second-largest salaried workforce worldwide in India and continue to manufacture engines for export until the second quarter of 2022. The company wishes to emphasize, however, that approximately 4000 of its employees will be affected by the changes, and Ford aspires to seek an equitable solution with the employees, unions, and other stakeholders.
Does this mean Ford customers in India will be affected?
The decision to cease production at local locations will be hard to swallow for existing owners, but Ford intends to provide full support for service, warranty services, and aftermarket parts. As long as the CBU business is supported by the network, dealers will also be able to operate. Smaller towns are more likely to experience fewer customer touchpoints.
The Ford enthusiasts out there do not need to fear since Ford will focus on imports in the future, similar to Australia and Brazil. In addition to the Mustang that Ford has already announced, Ford could also offer the Bronco, as well as other EVs, as well as the Ranger pickup truck that Ford had announced it would launch in India.
Can Ford’s Indian exports be affected by this?
Ford is set to close all of its manufacturing facilities by the second quarter of 2022, so export models won’t be produced. In spite of this, the company will fulfil existing export orders until Q2 2022, when all assembly will be completed. In spite of not using India as a hub for exporting to other regions, the carmaker continues to use India-based suppliers to supply parts for its global products.
Is there any other way Ford can continue to do business in India?
Due to Ford’s inability to produce cars in our market through a joint venture (JV), the only realistic option was to collaborate with another car manufacturer in India. Mahindra & Mahindra announced their JV with American automaker Ford in October. That deal, however, collapsed shortly thereafter, on December 31, 2020. Ford’s plans for the future are already based on the JV, as it has been in the making for almost three years. Ford suffered a huge backlash as a result, as without the JV, it had no new models in the near future, while the plants continued to stay underutilised. Earlier this year, we looked at Ford’s situation and options in India, which was a tough future.