Ford's India exit: What went wrong?
On September 9, American auto major Ford Motor Company said it is "forced" to end manufacturing operations in India and close plants at Sanand and Chennai, due to "huge accumulated losses and lack of growth in a difficult market".
The company has decided to wind down the manufacturing of vehicles for exports in Sanand, Gujarat by the fourth quarter of 2021 and vehicle and engine manufacturing in Chennai by the second quarter of 2022, a statement read.
After operating for almost 25 years in India, American auto major Ford Motor Company has decided to pull the plug on local manufacturing. The US automaker said that it would "take a hit of about $2 billion as it does not see a path to profitability in India."
This is the second major exit of local manufacturing operations in India by a global automotive brand. US giant General Motors, which entered India just a few years before Ford, stopped selling cars in India in 2017.
The company, which once tasted success with models like Ikon, Figo and EcoSport, has a passenger vehicles market share of less than 2 percent.
Ford is the fifth automaker which has announced to stop manufacturing in India after MAN Trucks, General Motors, Harley Davidson and UM Motorcycles.The US-based auto major has announced that it will only sell high-end models in India through the import route.
Vinkesh Gulati of the Federation of Automobile Dealers Associations (FADA) said Ford India has promised to adequately compensate dealers who will continue their services for the vehicle owners. “But that promise is not going to compensate for the huge investments made by dealers. Ideally, the government should step in and ensure that the company continues their services for a deserving period, as they are still selling their vehicles in India,” Vinkesh Gulati added.
What went wrong?
According to the industry experts, Ford didn't read the Indian market properly. The carmaker didn't customise the car platforms and the product strategy too was incorrect.
For a quite long time, small cars have ruled the Indian market. While Maruti Suzuki and Hyundai aced the market by focusing on small cars, Ford or General Motors failed to do so. None of these car brands had small cars in their global portfolio. They didn't customize their India product strategy according to the local market preference as well.
Who will be benefited?
Maruti Suzuki, Hyundai and Tata Motors have been keenly focusing on the UV segment for the last couple of years and tasted success as well. Maruti Suzuki has seen its market share in the UV segment grew from 12.4% in FY2015 to 21.6% in FY2021. Hyundai's market share grew from 0.3% in FY2015 to 20.2% in FY2021. Kia too has a good chance to grab this vacuum with its popular models such as Seltos and Sonet.