A day after Ford decided to end manufacturing in India, a government official said that Ford’s exit did not in any way reflect the story of the Indian automobile sector or the Indian economy. “Ford’s decision to end manufacturing is because of operational reasons and due to competition from Japanese and Korean car makers,” said the government official requesting anonymity.
On Thursday, Ford formally announced its decision to end manufacturing as the company had not been able to reap the benefits of its investments in India. “Despite investing significantly in India, Ford has accumulated more than $2 billion of operating losses over the past 10 years, and demand for new vehicles has been much weaker than forecast,” said Jim Farley, President of Ford Motor Company.
The company’s decision affects 4,000 Ford employees and 170 dealers and their 40,000 strong workforce. The company’s India models such as Figo, Aspire, EcoSport, Freestyle, and Endeavour would continue to be sold till stocks last.
Reacting to Ford’s decision, government officials said that the company’s decision was driven by operational inefficiency in market, which has otherwise attracted more than $35 billion in investments in six years. “Automotive sector continues to attract billions of dollars in investment, and Indian economy and auto sector continue to be great success story”, said the official.
Experts say that the departure of global OEMs has been driven by both company level decisions and their market performance.
“Some OEMs decided to focus on select geographies only in the past (and that did not include India) while other international OEMs have not been able to cater to an Indian customers demand the way Japanese and Korean manufacturers have. Their global template for product portfolio and sales & marketing strategy might not have been as effective in the Indian context. Customer today are more value conscious now and will prefer brands that offer greater value for money, sales experience and after sales support", said Rahul Mishra, Partner at Kearney India.
Ford India's MD Anurag Mehrotra said that despite the best efforts Ford had not been able to find a sustainable path forward to long-term profitability. “The decision was reinforced by years of accumulated losses, persistent industry overcapacity and lack of expected growth in India’s car market”, he said. Ford had been operating its plants at less than 20 percent capacity.
The Federation of Automobile Dealers expressed shock at Ford’s decision, as the company’s dealers still hold 1,000 vehicles through Rs 150 crore of inventory funding from banks. The body urged the government to seriously consider rolling out a Franchise Protection Act to ensure dealers are adequately compensated. “#Exit a day before #GaneshChaturthi2021, auspicious for purchasing vehicle! Did Ford consider customers refusing delivery of vehicles, registered and ready for delivery today! Dealers remain biggest losers when PV sales were picking & they could enjoy festivities”, said Vinkesh Gulati, the President of the automobile dealers body on twitter.