Why Did Ford Motors Leave India and What About Its Comeback Plan?

Like its predecessors, General Motors, Fiat, and Harley Davidson, Ford Motors too failed to sustain itself in the cut-throat and Price-conscious Indian auto market.

Ford Motors, an American multinational company started its venture in India in the back of 1995 with a capital of billions of US dollars to arrange the manufacturing services and a web of sales with new service centers to add up as after-sale services for new and existing customers across India.

In September 2021, they announced that they are wrapping up their business in India and said it was unviable for them. In the past 10 decades, they had been critically beaten by the Indian market recording operating losses of more than approximately 2 Bn dollars and 0.8 Bn dollars in a non-operating write-down of assets in 2019 alone. With poor sales and weak exports, the pandemic period had ended in smoke and a low level of demand in the market. Recently in June 2020, their sales were highly contracted, and eventually, as covid hit taking its sales lower than expected. Ford was completely unable to recover. And that was the big reason why they had laid off their business and closed their operations of manufacturing from India.

Despite serving in India for 27 years, their cars had the best diesel engine and 6 airbags in their cars. Ford was also known for its top-notch tough build quality. They had invested heavily in making BS-6 Diesel cars whereas every other competitor thought that this is not suitable for the Indian auto market.

Ford Motors too failed the same as its precursors General Motors, Fiat, and Harley Davidson in the Indian market to sustain itself profitably in the highly competitive and price-conscious Indian automobile market. In a press conference report extracted from the sources, Anurag Mehrotra, the President and Managing Director of Ford Motors India, had said that “Ford had taken this step only because they could not find a way to be profitable.” 

Having considered multiple options like partnerships, platform sharing and maybe even selling its manufacturing plants to OLA. He further said, 

The decision (to cease manufacturing in India) was reinforced by years of accumulated losses, persistent industry overcapacity, and lack of expected growth in India’s car market.

Growth and Market Aspect

As we all know Indian consumers are very price-sensitive and almost more than 40% of consumers prefer to give preference more to the low price rather than the quality of the product and average Ford Car costs an individual around 7-8 lakh in the Indian market due to the high prices the normal people had jumped more on to other cheaper alternative available in the consolidated market.

If we glance over the market division of the big giants – Hyundai, Maruti Suzuki, Mahindra & Mahindra, and Tata, they had shown an edge over Ford and these four manufacturers have controlled and influenced the whole Indian market till now. And that’s why many foreign ventures face difficulty in the initial period to stand out in public choices. Keeping only the growth rate of the market at around 2 to 3 percent CAGR (compound annual growth rate), Ford failed to grab the market demand. So, we can say the market is already crammed or consolidated and very possessed by the Indian giants and that was one of the big reasons for its failure.

Moreover, the type of cars needed was quite different from those demanded here in India mainly. Neither the components nor the size of the car were having huge demand nor are people willing to invest money. Thus, the types of cars demanded here were of low price segment, cars which require a low cost of ownership. Ford also tried to make pocket-friendly cars like their first India-made car, Ikon was a breakthrough in the market but its high maintenance cost was a severe flaw.

Did They Overinvest in an Overestimated Market?

Ford in 2011 invested 1 bn dollars to set up another manufacturing plant in Sanand, Gujarat with a capacity of 240,000 units per annum. whereas they were hardly able to sell only 80,000 units a year. Auto expert Hormazd Sorabjee said that “if Ford had not invested in Sanand, it’s possible that it wouldn’t have had to shut shop in India.”

They started focusing more on sub-4-meter products like Figo and Aspire. And Triggering and chasing Maruti Suzuki and Hyundai with compact sedans and hatchback cars was a huge mistake of the company. Meanwhile, they had stopped concentrating on SUV cars which they were known for. Like Ford’s, Ecosport and Endeavour were the blockbuster cars.

Another failed attempt was an alliance with Mahindra as a joint venture in the SUV (mid-size) segment that falls apart after a certain period.

Their turnover couldn’t match their sales and they had been scaling without profits, cost of making the plant was too high and the employee cost was also very high. That makes their decision to leave the Indian market more lucid.

Ford’s Future Plan

But, India is not the only country where Ford stopped their operations. In January 2021 it closed down in Brazil. Although they had mentioned that they will also continue to keep its doors open for its Ford Business Solutions Operations and apart from it, there were reports iterating to unveil a plan to deliver new fully electric and hybrid vehicles including the Mustang Mach-E globally ford was found.

The company has not mentioned its full-fledged comeback plan in India. But they said that the owners of Ford Motors cars will keep getting services for the next 8-10 years.