Ford Motors, one of the first global carmakers to enter the Indian market, on Thursday announced restructuring of the Indian operation under which the company decided to stop manufacturing vehicles at its two plants in the country, resulting in loss of jobs for about 4,000 employees.
“Ford India will cease manufacturing vehicles for sale in India immediately…[the company] will wind down vehicle assembly in Sanand by the fourth quarter of 2021 and vehicle and engine manufacturing in Chennai by the second quarter of 2022,” the company said in a statement.
Why Ford Took This Decision?
The decision was taken in the wake of huge loss that the company has accumulated in the past few years. The company said that it had accumulated losses of over $ 2 billion, $0.8 billion non-operating write-down of assets in 2019, in the last 10 years. This is due to a small market share it could capture in the last 10 years. The market share of the company is still 1.8 per cent.
In India, with Ford Motor shutting down its operation, this becomes the 4th automobile company that will stop operations in the automobile market over the last five years. In this list, Ford is a new entrant, before Ford, American company General Motors (GM) and the American motorcycle company Harley-Davidson exited the Indian markets. In September last year, Harley-Davidson announced the closure of its production facility in Bawal, Haryana, in addition to “significantly reducing” the size of its sales operations in Gurgaon.
Is the Company Exiting India Completely?
However, Ford also made it clear that the company will not be fully exiting the India market, and will focus on its ‘Ford Business Solutions’ as it looks to create a “sustainably profitable” business in the country.
The company in its statement mentioned that the decision was taken after exploring the every possible option to survive these difficult times. The options that were considered were partnerships, platform sharing, contract manufacturing with other OEMs, and the possibility of selling its manufacturing plants, which is still under consideration. In this bid, Ford approached Indian car market Mahindra and Mahindra to ink a deal for producing cars, however, much progresses was not made on that deal. If Ford India and domestic carmaker Mahindra and Mahindra had signed a deal and started a joint venture partnership, it would have given a new lease of life to Ford Motors as it could continue producing cars at a lower cost than its present costing but would cease its independent operations.
How the Company Was Performing?
Largely, the Indian automobile market is dominated by Japan’s Maruti Suzuki and South Korea’s Hyundai, both of them together constitutes 60 per cent of total market share. On the other hand, Ford managed to have a market share below 2 per cent since last many years.In August, Ford had a share of 1.4 per cent in the Indian markets. Earlier, Ford exited from Brazilian market.