Ford will stop making cars in India

  • Ford racks up more than $2 billion in losses in 10 years
  • The company has a 2% market share and is struggling to increase sales
  • Ford follows GM and Harley in stopping production in India

NEW DELHI, Sep 9 (Reuters) – Ford Motor Co (FN) will stop making cars in India and make about $2 billion in profit as it sees no path to profitability in the country, becoming the latest automaker to leave a major manufacturer. market growth dominated by Asian rivals.

The US automaker entered India 25 years ago but still has less than 2% of the passenger vehicle market after struggling for years to win over Indian consumers and turn a profit.

Ford said in a statement on Thursday that it had accumulated more than $2 billion in operating losses in 10 years in India and demand for its new vehicles had been weak.

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“Despite (our) efforts, we have not been able to find a sustainable path to long-term profitability,” said Ford India head Anurag Mehrotra in a statement.

Ford’s decision to trim its losses in India after leaving Brazil earlier this year underscores the pressure on global automakers to invest more in electric and automated vehicles, as well as connected vehicle technology.

The global automaker once struggled to maintain a presence in every major market, and was willing to lose money to do so.

Today, companies such as Ford, General Motors (GM.N), Renault SA (RENA.PA) and Stellantis NV (STLA.MI) are abandoning loss-making businesses and turning capital towards electrification and investing in the technology they need to survive.

Ford’s decision is also a setback for Indian Prime Minister Narendra Modi’s “Make in India” campaign. It follows other US vehicle makers such as General Motors (GM.N) and Harley Davidson (HOG.N) that have left India in recent years.

Mehrotra said Ford’s decision was also reinforced by “the industry’s continued overcapacity and lack of expected growth in the Indian auto market”.

India is expected to become the world’s third largest auto market by 2020 after China and the United States with sales of around 5 million vehicles per year. In contrast, sales have languished at around 3 million, still lagging behind Europe and Japan as well.

The Indian car market is dominated by cheap cars, especially small cars made by Japan’s Suzuki Motor Corp (7269.T). Its Maruti Suzuki brand accounts for seven of the top 10 sellers with South Korea’s Hyundai Motor (005380.KS) making the other three.

A visitor is seen taking a picture of the new Ford Aspire at its launch in New Delhi, India, October 4, 2018. REUTERS/Anushree Fadnavis

Ford has increased investment in electric vehicles (EVs) and advanced software. In May, it said it would increase spending on EVs by a third to $30 billion by 2030.

With so much to do with Ford Chief Executive Jim Farley since he took over last year and limited financial resources, India is a lower priority, a source previously told Reuters.

As part of the plan, Ford India will cease operations at its Sanand plant in western Gujarat state in the fourth quarter of 2021 and vehicle and engine manufacturing at its south Indian plant in Chennai in 2022.

Ford has the capacity to produce about 440,000 cars in India per year at both plants but only uses about 25% of those, according to data intelligence firm Global Data.

The US automaker will continue to sell some of its cars in India through imports and will also provide support to dealers to service existing customers, he said. Around 4,000 employees are expected to be affected by his decision.

The decision to halt production came after Ford and Mahindra & Mahindra India (MAHM.NS) failed to complete a joint venture partnership that would have allowed Ford to continue to make cars at lower costs than it is now but ceased independent operations.

Ford said it was considering several other options for India including partnerships, sharing platforms, contract manufacturing and possibly selling its factories, a plan that is still under review.

Ford will continue to operate its engine plant in Sanand which exports engines for its Ranger pickup trucks globally. It will also continue to rely on India-based suppliers for parts for its global products.

The Federation of Indian Automobile Dealers Associations said in a statement that they were surprised by Ford’s move, saying the US company’s decision to only compensate dealers offering vehicle service to customers was also “not enough”.

There are 400 Ford outlets in India where dealers have over time invested 20 billion rupees ($272 million), the association said in a statement, adding that the automaker had appointed new dealers up to five months ago.

“Dealers like that will suffer the biggest financial losses in their lifetime,” he said.

($1 = 73.5740 Indian rupees)

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Reporting by Aditi Syah; Edited by Sanjeev Miglani, Susan Fenton and David Clarke

Our Standards: The Thomson Reuters Trust Principles.

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