Potential reasons behind Ford Motor’s exit from India

India is one of the largest automobile markets worldwide with some key players having been around for decades if not more.

However, there have been bad performers as well that have just not been able to find a fix to their disappointing run.

One such company is Ford which has decided to shut shop in India, creating a major impact on thousands of jobs.

The company cited “years of accumulated losses, persistent industry overcapacity and lack of expected growth in India’s car market,” to Business Standard, as the major reasons behind their move to wind down manufacturing of vehicles for export in India.

Ford India will put an end to a 26-year-old manufacturing chapter by shutting down both Gujarat and Tamil Nadu operations.

The shutting down of Ford car factories across the country, which the company’s former management saw as one their three key markets.

The assembly plant in Gujarat will be wrapped up by the fourth quarter of 2021, while the Chennai plant, which looks after engine and vehicle manufacturing, will be closing its doors by Q2 of 2022.

The news had a slight impact on the company’s shares as they slipped 0.6% before regular trading kicked off. All this while the overall stock has surged by about 48%.

Ford’s move doesn’t really help Prime Minister Narendra Modi’s Make-in-India campaign, which urges global companies to set up shop in the country and manufacture locally.

Potential reasons behind Ford’s goodbye to India

High taxes: The Union Government’s high taxes like heavy levies imposed on gasoline vehicles has been a real problem when it comes to getting more foreign participation.

Elon Musk’s Tesla Inc., in the past, has pushed for the Modi government to allow cheaper imports of their cars before it can finalise plans to set up factories in India.

The high tariffs have also been a problem for Toyota, which decided against expansion in the country, while companies like Harley Davidson Inc. and General Motors Co. also took the exit route in the past.

Ford’s marketing failure: While the government can be blamed for its conservative approach, Ford’s product and marketing outreach in India hasn’t been the best anyway.

In Journalist Kushan Mitra’s view, cars like Ford Figo and Aspire, regardless of a decent petrol engine, were unsuccessful in tapping the right market for themselves at a time when they were competing with the likes of Tata, Maruti and Hyundai.

Ford became one of the major car makers, alongside General Motors,  from the West to enter India when the country’s economy opened itself to the world in the 1990s. 

However, the company’s performance lately has been questionable owing to the persistence shown by its competitors and the entry of new players in the Indian market, making survival a tad bit more difficult for the old guards.

Companies like Kia India have single-handedly outsold Ford over the last two years by significant margins.

After GM, Ford has become the second major American automobile manufacturer to exit India.