Ford is ending production in India and taking a $2 billion hit in the process

In an announcement on Thursday, the company said that around 4,000 employees would be laid off and manufacturing would cease immediately. CEO Jim Farley said the move was “difficult but necessary” to achieve long-term growth.

“Despite significant investments in India, Ford has posted an operating loss of more than $2 billion over the past 10 years and demand for new vehicles has been much weaker than forecast,” Farley said.

Ford’s India head, Anurag Mehrotra said the entity “has not been able to find a sustainable path to long-term profitability, including vehicle manufacturing in the country.” He said the decision was reinforced by “years of accumulated losses, persistent industry overcapacity and lack of expected growth in India’s car market.”

Two of Ford’s plants in the cities of Sanand and Chennai will be closed in the coming months and the company will work closely with employees affected by the closure.

Payab (F) India has been struggling for a long time, which last year was the world’s fifth-largest auto market. The automaker began operations there in 1995, and has invested more than $2 billion in the country over the past 25 years.
But it has barely garnered any market share. According to the Federation of Automobile Dealers Associations, the body that represents automobile dealers, Ford controlled about 1.8% of the market in July, up from about 2.1% a year earlier.
Top carmaker Maruti Suzuki – an Indian firm owned by Japan’s Suzuki Motor Corporation – had around 45% market share in July, while South Korea’s Hyundai (HYMTF) 17% controlled.

Despite those challenges, the decision to end production surprised some industry experts.

“It has come as a shock because they had invested so much in India,” said Hormazd Sorabjee, editor, Autocar India. He attributed Ford’s problems to the company’s inability to “acquire the Indian psyche”, adding that the automaker had spent money in areas that customers did not appreciate.

For example, Sorabji pointed to the Sanand plant, which he argued was too expensive. (According to Reuters, the factory cost $1 billion and opened in 2015.)

“It is built like the Taj Mahal,” he said. “Western producers just don’t think frugally.”

In 2019, Ford struck a deal with local rival Mahindra to move most of its Indian business into a new joint venture, but the deal fell through late last year. The companies cited “fundamental changes in global economic and business conditions” due to the pandemic.
Ford is the latest American carmaker to cut its Indian business in recent years. General Motors (GM) In 2017 announced that it would stop selling cars in the country.

“While India appears to be a very promising market from the outside, it is also a really tough one,” said Ruchi Agarwal, co-founder and CFO of CARS24, an online marketplace for used cars. He called the market “price-sensitive.” Adding up the Average Selling Price of a New Car is approximately $10,000.

Sorabjee said the cheap car market is “locked down by a handful of manufacturers” who have figured out how to operate in Asia’s third-largest economy.

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