The U.S. automaker said that it will continue to sell some of its cars in India through imports and it will also provide support to dealers to service existing customers
Ford Motor Co will stop making cars in India and take a hit of nearly US$2 billion because it does not see a way to profitability in the country, becoming the latest automaker to leave the major growth market dominated by Asian rivals.
The U.S. carmaker entered India 25 years ago but still has less than 2 per cent of the passenger vehicle market having struggled for years to win over Indian consumers and turn a profit.
Ford said in a statement on Thursday that it had accumulated operating losses of more than US$2 billion in 10 years in India and demand for its new vehicles had been weak.
Despite efforts, we have not been able to find a sustainable path forward to long-term profitability, Ford India head Anurag Mehrotra said in the statement.
Ford’s decision to cut its losses in India after leaving Brazil earlier this year underscores the pressures on global automakers to invest more in electric and automated vehicles, as well as connected vehicle technology.
Mehrotra said Ford’s decision was also reinforced by persistent industry overcapacity and lack of expected growth in India’s car market.
Ford has been escalating investment in electric vehicles (EVs) and advanced software. In May, it said it would boost spending on EVs by a third to US$30 billion by 2030.
With so much on Ford Chief Executive Jim Farley’s plate since he took charge last year and limited financial resources, India was a lower priority, a source previously told Reuters.
As part of the plan, Ford India will wind down operations at its factory in Sanand in the western state of Gujarat by Q4 2021 and vehicle and engine manufacturing in its southern Indian plant in Chennai by 2022.
According to data intelligence company Global Data, Ford has the capacity to produce about 440,000 cars in India a year across both plants but is only using about 25per cent of that.
The U.S. automaker will continue to sell some of its cars in India through imports and it will also provide support to dealers to service existing customers, it said. About 4,000 employees are expected to be affected by its decision.
The decision to stop production came after Ford and India’s Mahindra & Mahindra failed to finalise a joint venture partnership that would have allowed Ford to continue making cars at a lower cost than now but cease its independent operations.
Ford said it had considered several other options for India including partnerships, platform sharing, contract manufacturing and the possibility of selling its manufacturing plants, a plan that is still under review.
Ford will continue to operate its engine factory in Sanand which exports engines for its Ranger pick-up trucks globally. It will also continue to rely on India-based suppliers for parts for its global products.