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