By Satyaki Paul
Recently, the Ford Motor Company, one of the first global carmakers to enter the Indian market following the LPG reforms that began in 1991, has decided to end manufacturing operations in the country. This is the third American company to exit the Indian marketplace after Harley Davidson, and General Motors (also known as Chevrolet).
This brings to our first question that: why are US companies leaving India?
The Ford Motor Company in a statement, has said that it had accumulated losses of over $ 2 billion in the last 10 years, and that the phased closure of its two production units in Sanand, Gujarat, and Chennai, Tamil Nadu, would affect approximately 4,000 employees.
Secondly, which companies stopped producing cars in India in the last few decades?
In 2021, Ford joins a growing list of global vehicle makers that have stopped operations in the world’s fourth largest automobile market over the last five years. In that list are Ford’s American rival General Motors (GM) and the American motorcycle company Harley-Davidson. In the last few decades, companies such as Opel, Fiat, and even our own Hindusthan motors have stopped all operations in India.
Thirdly, why such decisions were made?
In current context, Ford’s announcement came just months after discussions to transfer its operations to local rival Mahindra & Mahindra were called off. Ford in India was also reported to be in talks with mobility tech company Ola for the latter’s plan to manufacture electric scooters, before Ola decided to go alone and set up a giga factory of its own.
Fourthly, why did Harley-Davidson and GM leave India?
The General Motors (also known as Chevrolet) closed its manufacturing unit in Halol, Gujarat, in 2017, and sold its Talegaon, Maharashtra, facility to China-based Great Wall Motors. This was done GM as because of the declining sales in India citing mounting losses and near-negligible sales. In the month of September, 2020 Harley-Davidson announced the closure of its production facility in Bawal, Haryana, in addition to “significantly reducing” the size of its sales operations in Gurgaon. In current context, the Harley-Davidson India operations is overlooked by our native company Hero Motor Company after signing a MoU with the latter.
Fifthly, what is the state of production capacity of Ford Motors in India?
The Ford Motor Company has two plants in India. These two plants have an annual manufacturing capacity of 400,000 units, but lately it had been operating at a utilisation of 20 per cent, half of which was being exported. In the month of August, 2021 Ford had a share of 1.4 per cent in the Indian market, which is dominated by Japan’s Maruti Suzuki and South Korea’s Hyundai Motor, who together have more than 60 per cent share. In this context, Ford India said that it would continue to sell imported CBU (Completely Built-up Unit) models in India, but it would “significantly expand its 11,000-employee Business Solutions team in India in coming years to support Ford globally”. “As part of our Ford+ plan, we are taking difficult but necessary actions to deliver a sustainably profitable business longer-term and allocate our capital to grow and create value in the right areas,” Jim Farley, president and CEO of Ford Motor Company, said.
Lastly, why did Ford draw the last straw in India?
In the month of August, 2012 at the annual convention of the Society of Indian Automobile Manufacturers (SIAM), top executives of vehicle makers had raised concerns over high taxation and rising fuel costs. In such veins, Ford opined that it would begin importing and selling some of its premium and electric vehicles in India, while sales of its current products such as Figo, Aspire, Freestyle, Eco Sport and Endeavour would cease once existing dealer inventories were exhausted. The Ford Motor Company also stressed that it would work closely with employees, unions, suppliers, dealers, government, and other stakeholders in Chennai and Sanand. As per top executives this will be done “to develop a fair and balanced plan to mitigate the effects of the decision”. It would augment its 11,000-employee business solutions team in India that includes software developers, data scientists, Research & Development (R&D) engineers, and finance and accounting professionals in the coming years, as per statement of Ford India.