Ford Motor Company announced last week that it will stop producing cars in India as the global automotive industry continues to tackle the shortage of semiconductors and other components due to supply chain disruptions.
Headquartered in Dearborn, Michigan and operating in India for 25 years, the company has closed its domestic plants in the footsteps of other U.S. automakers General Motors and Harley-Davidson. ..
Ford said it considered several options on Thursday, but concluded that it “could not find a sustainable path to long-term profitability, including domestic car manufacturing.” The company has accumulated more than $ 2 billion in losses over the last decade and demand for new cars has been sluggish.
In an interview with The Economic Times, Autocar India editor Hormazd Sorabjee said, “This is basically a matter of culture or thinking for many Western manufacturers.” “Their cost structure and their way of thinking about costs has nothing to do with what they need to do in India.”
Ford’s withdrawal comes when the wider automotive industry faces a global shortage of semiconductor chips and other components. The demand for chips surged as the pandemic forced millions of people to work from home and disrupted the supply chain with blockages and other restrictions.
India, Toyota, Mahindra & Mahindra market leader Maruti Suzuki has announced a reduction in vehicle production due to a chip shortage. Billionaire Anand Mahindra Mahindra & Mahindra has launched a larger SUV named XUV700, but has not yet announced an official launch date. The vehicle is expected to hit the market in October.
Ford said restructuring would cost automakers about $ 2 billion and would affect about 4,000 employees as it shuts down car production at its plants in Sanand, Gujarat and Chennai, Tamil Nadu. More than 500 employees at the Sanand facility will continue to manufacture engines for export, and parts distribution and customer service will require approximately 100 employees. Sales of the company’s current vehicles, such as Figo, Aspire, Freestyle, EcoSport and Endeavor, will cease when existing dealers run out of stock.
The withdrawal of automakers occurs when the Indian passenger car market has been declining in the last five years. According to the Indian Automobile Manufacturers Association (SIAM), passenger car sales in 2020-21 (after the April-March accounting period) were 2.71 million units, up from 2.77 million units in the previous year. Sales peaked at 3.37 million in 2018-19.
As part of Ford’s restructuring program, the company said it intends to expand its Ford business solutions business, which currently employs more than 11,000 people. The team supports global operations and focuses on engineering and technology. According to the release, this extension offers more opportunities for software developers, data scientists, R & D engineers, finance and accounting professionals.
Ford entered India in 1995 in partnership with Mahindra & Mahindra, headquartered in Mumbai. Mahindra was primarily a manufacturer of tractors and utility vehicles at the time. A greenfield plant was built near Chennai, from which it launched a medium-sized entry-level sedan called Ikon as the first product for the Indian market. The partnership with Mahindra ended a few years later, but in 2017 the two only reunited. This didn’t last long, and the partnership was discontinued towards the end of 2020.
General Motors stopped selling cars in India at the end of 2017 after 20 years of operation in India. The company was discussing selling one of its plants to its longtime partner SAIC Motor Corp in China and the second plant to Great Wall Motor in China. It is also due to the border conflict between India and China.
A recent entrant to India, the iconic motorcycle brand Harley-Davidson stopped assembly work in India in 2020 as part of its global restructuring program. The Donald Trump administration sought to persuade India to reduce import taxes on imported motorcycles. However, there was limited success.