Withdrawal in India
Several media including The New York Times reported that Ford would stop manufacturing cars in India. In addition, it expected to record a US$2 billion restructuring charge after failing to find the way to survive there. What’s more, the company had accumulated operating losses of more than US$2 billion over the past 10 years. Even though this number is already huge blow, it had US$800 million write-down of assets in 2019.
Ford entered India back in 1995 and has since invested billions of US dollars to setup manufacturing facilities. In addition, the American company also invested in a network of sales and service centers for new and existing customers across the country.
These facilities not only produce engines and vehicles for the domestic market, but for various export markets as well. Ford’s facilities in Chennai, Tamil Nadu and Sanand, Gujarat have a combined manufacturing capacity of 440 thousands vehicles.
Of course, there are several reasons why Ford made this decision to stop making cars in India. One of them is definitely the pandemic, but we can say that it accelerated the difficulty in the market. In addition, automotive companies are experiencing the chip shortage as well. As a result, even Toyota, which is very famous for well-planned manufacturing, stopped its production in the latter of 2021. However, the dominance of the Japanese and Korean automotive manufacturers is a big reason why the competition is tight.
For example, Maruti Suzuki has a roughly 48 per cent share in the Indian market. In addition, Hyundai India has around 17 per cent as well. At the same time, demand in the market was not growing fast. Auto sales there have registered a combined annual growth rate of just 1.5 per cent over the past five years,
Other manufactures also lost the competition and withdrew the market. Ford’s US rival, General Motors exit in the Indian market in 2019. The company also did Russia and Europe because it thought the operations were non-profitable. Harley Davidson left India in 2020 as part of its ‘Rewire’ strategy to focus on select markets. They are North America, Europe and some parts of Asia.
Locality and challenge
Another reason why the US automotive companies were struggling in India was the difference of consumers’ preference. Of course, the American people really like bigger vehicles than Indian do. Therefore, GM or Ford’s expertise is totally different from that of Maruti Suzuki or Hyundai. Also, Indian people still like small cars. Thus, it seems natural that Ford had accumulated operating losses over the past 10 years.
Even though Maruti Suzuki and Hyundai are top market share companies, they also face a big challenge. It is electrification. This is because they need huge investment in producing electric vehicles (EVs). What’s more, batteries still account for large space in EVs. In this sense, small cars do not match with the requirement of EVs compared to big vehicles. Furthermore, there are fewer charging stations in India. The Japanese and the South Korean company should overcome these challenges as well.