Global automobile giant Ford has slammed the brakes on India. In a statement, the company has said it will stop manufacturing vehicles in India, attributing the decision to the slowdown in sales and low volumes.
The American carmaker went on to say that it has not been able to reap the benefits of its investments in India. In a statement, Ford India said the company has clocked losses of over $2 billion over the last 10 years. It also wrote down assets to the tune of $800 million in 2019. The capacity utilisation of the plant is at 21 percent, which is yet another reason citied by Ford as it downs the shutters in India.
To discuss this, CNBC-TV18’s Parikshit Luthra spoke to Vinkesh Gulati, President of FADA; Aditya Makharia, research Analyst of HDFC Securities; Dilip Chenoy, secretary general at FICCI, and Nikunj Sanghi of Auto Skill Development Council.
Vinkesh Gulati said, “We were already listening about the Ford going through a tough phase, they tied up with the Mahindra for revamping the production and technological collaboration also, but it didn’t go ahead and it fell off. So, yes, they came with a very good product and then even later EcoSport and all those products, but still the numbers did make an impact where you can say a full-blown company like Ford has a presence in India."
"Very small market share as you see so, overall somewhere the decision of launching what product or at what price was always an issue with Ford, but there was some really beautiful one or two productions they came in. But I feel in a whole way somewhere the importance of India and India based product to be launched has lost in the planning which has affected this Ford restructuring process what they have started now.”
Dilip Chenoy said, “It is not India market phenomena and I think it is linked more to the company's strategy and the company capability to focus on India. I think given Ford’s, huge challenges in Europe and the US, I think they have just decided it makes sense to whatever capital and whatever resources that they have to focus on those two markets and grow in those markets other than India."
"In fact, a few years ago, they were majorly exporting out, I mean, their exports from India were larger than the domestic sales, but again, like you quoted out saying that, the regulatory changes have actually led to the different scenarios for them that would have led to this decision.”
He added, “ So, India as automotive market it is growing, India as a place to invest in in the automotive sector is definitely positive, India as a place where automotive markets can get return on investment, yes, if you have the right strategy, the right product and the right distribution strategy and financing strategy in India. So, I think India is still an attractive thing, it is unfortunate that Ford has decided for this, but I am sure that there were other players who will enter the market in the next few months. In fact, I think you will see some more entries coming in and the automotive market and the automotive investments in India will be profitable and will be successful.”
Aditya Makharia said, “The way I see the scenario, it is a little bit more different. If you just step outside to what is happening in the world around us, you will see that post COVID lot of global equations have changed now when it comes to financial commitments. Secondly, what we are also seeing is that the world now is focusing very aggressively on electric vehicle targets for the global markets."
"Now when you keep this backdrop in mind, India has always been an outlier in terms of car market, because we have always remained a small car market and what we have found is that the global OEMs have in general found it difficult to refresh their product cycle as quickly as let us say an incumbent which is Maruti or Hyundai and now locally, we are also seeing the likes of Tata Motors getting their act together."
"So, on the one hand globally, you have electric vehicle targets coming in for which Ford has also given very, very aggressive targets when it comes to US and Europe. At the same time, the investments in India are not yielding fruit so, if you look at the overall scenario, also the fact that the car market in India has not really grown so we have been around a 3.50 million mark ballpark over the last four or five years. So, everything coming together at one go has made Ford go ahead over the decision.”
He added, “Somewhere if you balance out the messaging which will go out to the community of investors, you will also see there are a few success cases such as Kia which has come in to India and made their presence really felt. So they have been somewhere also nimble in understanding the Indian consumer mindset better.”
For full interview, watch accompanying video...