Wednesday, May 18th, 2022

Why is US car maker Ford shutting down manufacturing plants in India?

Ford is the fifth automaker to announce the closure of manufacturing in India. After operating for 25 years in India, US auto major Ford Motor Company has decided to pull the plug on local manufacturing. The US automaker said it would “loss around $2 billion as it sees no way to profitability in India.”

The Ford company, which has once tasted success with models such as the Ford Icon, the Ford Figo and the EcoSport, currently holds less than 2 percent of the passenger vehicle market share. Ford India will shut down operations at its plant in Sanand in Gujarat by the fourth quarter (Q4) of 2021 and vehicle and engine manufacturing at its Chennai plant by 2022.

Ford is the fifth automaker to announce the closure of manufacturing in India after MAN Trucks, General Motors, Harley Davidson and UM Motorcycles. In addition, Honda Cars India closed its facility in Greater Noida, Uttar Pradesh. The Japanese carmaker discontinued its CR-V and Civic models in the country. However, Honda has one more facility (Tapukara Plant) in Rajasthan which is operational.

Here’s why Ford decided to end manufacturing in India:

Weak Demand:

Ford said it has accumulated an operating loss of more than $2 billion in 10 years in India and that demand for its new vehicles has been weak. Ford India head Anurag Mehrotra said, “Despite (our) efforts, we have not been able to find a sustainable path to long-term profitability.”

low cost cars

The car market in India is mainly dominated by cars from Maruti Suzuki India and Hyundai Motor India. Ford, on the other hand, struggled for years to become profitable in India. Ford and Hyundai entered India in the mid-1990s. But the fortunes of both the companies are completely different when it comes to business. Where Hyundai became the second largest company in the country and Ford is closing its manufacturing ops.

Failed Joint Venture Efforts:

Ford and Mahindra & Mahindra failed to finalize a joint venture partnership that would have allowed the US auto major to continue producing cars at a lower cost.

End of the Road for Mustang and Endeavor in India?

No, the US automaker said it will continue to sell some of its high-priced cars (Mustang and Endeavor) in India through imports and will also provide support to dealers to service existing customers.