Why is Ford Motors closing down its Manufacturing Plants in India? [Case Study]

The Indian automotive industry was left with even fewer brands as Ford Motors departed from the Indian markets on Friday. The motor giant had announced its decision to shut down all local manufacturing facilities on Thursday.

The unpleasant news meant worse for car dealers and the company's employees as this would affect them in the long run. The manufacturing plants will continue to operate until 2022 for the sole purpose of manufacturing export vehicles. This means their models for the Indian Market such as Figo, Aspire, Freestyle, EcoSport, and Endeavour will no longer be produced.

For those who have kept track of the auto market, this shouldn’t be something too surprising. Ford is the most recent automotive brand to leave the Indian markets as we’ve seen with Harley Davidson, Chevrolet, and Fiat before. Did all these brands leave for the same reasons or did each of them have their own barriers that stopped them? We’ll take a deeper look into what drove Ford Motors to make this difficult decision.

What went wrong with Ford?
The Future of Ford in India
FAQ

What went wrong with Ford?

Ford’s been in the Indian market since 1995, although the company had begun its initial days back in 1926, it had come to halt due to severe import restrictions enacted at the time.

Ford had resurfaced as Mahindra Ford India Limited (MFIL) a joint venture with Mahindra & Mahindra Limited. The company was then renamed to Ford India Private Limited. Further down the lane, we got to see some of the most iconic cars released by Ford such as the Ikon and Mondeo Mk3.

There are a few reasons that have contributed to the company’s decision to stop dealing in the Indian market. The decision was bold and calculated to ensure the long-term profitability and sustainability of the company.

Poor Sales Conditions

Consumers have always loved Ford but the Indian auto industry as a whole is going downhill. This is rather something to do with how the market is performing and isn’t specific to the brand.

People have a variety of options available in the market and this has reduced the company’s demand in the Indian market over the years. It’s rather clear from the numbers that the company wasn’t getting any better in terms of market share over the years.

Furthermore, the pandemic meant that fewer people are buying cars which just added to the company’s declining profits in the country.

Immense Losses

Ford has lost more than $2 billion over the last 10 years in India. Although models such as the EcoSport had sufficient sales, it wasn’t enough to be considered profitable for the company. Based on how the company operates in India, it's worth considering the $0.8 billion spent in 2019 just for operations.

Ford has tried to incorporate global standards for its manufacturing plants and operations alike. These may have been a little too expensive for the country and cost them more money than the potential profits.

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Broken Joint Venture with Mahindra

The tie-up between Ford Motors and Mahindra has allowed the company to produce new cars faster and with less investments in the past. The joint venture formed in October, 2019 meant Mahindra was owning a 51 percent controlling stake and Ford owning a 49 percent stake.

The companies were to cooperate specifically for the co-development of 3 new SUVs and an electric vehicle. But this was not to be, as the partnership was called off in December, 2021. The reasons for this were apparently in the best interests of both companies although there is no official statement.

This also means that the upgraded version of Ford’s EcoSport which was to feature Mahindra's 1.2-liter direct-injection turbo-petrol engine will not be released later this year. The declining sales meant that Ford was relying on the partnership as well as the new SUVs to keep them afloat. The formal end of the joint venture has left the company in a rather difficult position.

The company was forced to make a choice that would have a deep impact on its future profits. Ford makes more money in other countries like the United States where it’s still able to get sales and keep pushing more expensive cars to consumers.

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The Future of Ford in India

To those of you who might be wondering if this is the end game for the company, it certainly isn’t. Ford Motors isn’t leaving India, rather it has put a stop to all manufacturing of local vehicles. The manufacturing plants in Chennai (Tamil Nadu) and Sanand (Gujarat) will be shut down in a phased manner. As of right now, these will still be used to manufacture export vehicles and parts.

Ford has always provided great customer support. The company promises to keep providing existing owners with the same care and support regardless of their decision. As mentioned by Anurag Mehrotra, president of Ford India, car owners will still have access to spare parts and services through local dealers and customer support if it's needed for any reason.

As for resales, you might not get as much value as expected. This is the same for any motor brand that isn’t operational in the country anymore. While this is true, cars like the EcoSport are still a good buy if you aren’t too paranoid about the resale value and just want a great car at an affordable price. Service and parts will be provided by Ford as previously mentioned, meaning that getting a Ford car in 2021 can be a satisfying deal if you choose to.

Ford still plans to serve the Indian market in the form of global imports. Popular global models such as the Ford Mustang will be available to consumers in the form of imports. This just goes to show how desperate the company is to stay operational in the country and how the decision was made purely to ensure the sustainable future of the motor manufacturer. Ford had tried reaching out to multiple manufacturers trying to ensure another joint venture but unfortunately, none have worked out for varying reasons.

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Conclusion

Ford’s recent move isn’t very pleasant considering the 4,000 employees who just lost their job. Regardless, the company has made its mind and taken a decision that will aid their benefits. Ford plans to bring more international cars to India and we’ll have to wait and see how things turn out.

The Indian automotive industry and car enthusiasts alike are sure to miss the brand. But as things are in motion the best we can do is watch out for some great deals for used cars and hope that Ford Motors stays on Indian grounds in the future.

FAQ

Why is Ford shutting down its manufacturing plants?

Ford is shutting down its operations in India as it has lost more than $2 billion over the last 10 years in India.

Is Ford Leaving India?

No, Ford will shut down its manufacturing plants but Ford owners will still have access to spare parts and services through local dealers.

Will Ford support the existing customers?

Yes, as mentioned by Anurag Mehrotra, president of Ford India, car owners will still have access to spare parts and services through local dealers and customer support if it's needed for any reason.