Ford took a $2 billion hit to stop making cars in India, after compatriots General Motors Co. and Harley-Davidson Inc. in closing factories in the country.
see photosFord took a $2 billion hit to stop making cars in India.
When Ford Motor Company built its first factory in India in the mid-1990s, American carmakers believed they were buying into a boom – the next China. The economy was liberalized in 1991, the government was welcoming to investors, and the middle class was expected to fuel the consumption frenzy. Forecasters said the increase in disposable income would push the market share of foreign carmakers to 10 per cent. This never happened. last week, Payab It took a $2 billion hit to stop making cars in India, after compatriots General Motors Company and Harley-Davidson Inc closed factories in the country. Among foreigners, Japan’s Nissan Motor Co Ltd and even Germany’s Volkswagen AG – the world’s largest automaker by sales – each accounted for less than 1 percent of the car market, which is comparable to China’s. and is projected to be the third largest by 2020 after United. States with annual sales of 5 million. Instead, sales have stalled at about 3 million cars.
The growth rate has slowed down to 3.6 per cent in the last decade from 12 per cent a decade ago. Ford’s retreat marks the end of an Indian dream for American carmakers. It also follows Brazil’s exit announced in January, marking the industry’s pivot from emerging markets to what is now widely seen as a make-or-break investment in electric vehicles. Analysts and officials said foreigners misjudged India’s potential and underestimated the complexities of operations. In a vast country that rewards home buying. Many failed to adapt to the preference for smaller, cheaper, fuel-efficient cars that could hit uneven roads without needing expensive repairs.
In India, 95 percent of cars cost less than $20,000. Lower taxes on small cars have made it harder for makers of big cars for Western markets to compete with small-car experts controlling Japan’s Suzuki Motor Corp — a shareholder of Maruti Suzuki India. Ltd., India’s largest car manufacturer by sales. Among foreign carmakers investing in India alone in the past 25 years, analysts said only South Korea’s Hyundai Motor Company has been successful, mainly because of its wide portfolio of small cars and its understanding of what. Indian buyers want, “Companies invested on the illusion that India would have huge potential and buying power of buyers would increase, but the government failed to create that kind of environment and infrastructure,” said Ravi Bhatia, president of India at JATO Dynamics. said. , provider of market data for the auto industry. Some of Ford’s faults can be traced back to when Hyundai arrived in India in the mid-1990s.
While Hyundai entered with the smaller, economical “Centro”, Ford offered the “Escort” saloon, which was first launched in Europe in the 1960s. Former Ford India executive Vinay Piparsania said the Escort’s price made Indians used to Maruti Suzuki’s more affordable prices. LMC analyst Ammar Master said the narrow product range made it difficult to capitalize on the appeal won by its best-selling EcoSport and Endeavor sport utility vehicles (SUVs). The carmaker said that it had considered bringing more models to India, but determined that it might not do so profitably.” Master said, “The struggle for many global brands has always been the India price point. as they brought global products that were developed for mature markets on a high-cost framework.” A feature of the Indian market came in the mid-2000s measuring less than 4 meters (13.12 ft) in length. With a lower tax rate for cars
This left Ford and rivals to build an India-specific sub-4 meter saloon, for which sales ultimately disappointed. “American manufacturers with big truck DNA struggled to make a good and profitable small vehicle. Nobody got the product right and there was a loss,” says Jato Bhatia. Rise and Fall Ford had spare capacity at its first India plant when it invested $1 billion a second in 2015. It had planned to make India an export base and increase its market share projected to hit 7 million cars a year by 2020. 9 million by 2025. But sales never happened and overall market growth stalled.
Ford now uses only 20 percent of its combined annual capacity of 440,000 cars. To utilize its surplus capacity, Ford planned to manufacture compact cars in India for emerging markets, but the plans were shelved. Amid the global consumer preference shift for SUVs in 2016. It changed its cost structure in 2018 and the following year began work on a joint venture with local peer Mahindra & Mahindra Ltd, designed to reduce costs. Three years later, in December, the partners abandoned the idea. After sinking $2.5 billion since entering India and burning $2 billion in the past decade alone, Ford decided not to invest any more. told reporters last week. “Unfortunately, we haven’t been able to do that.”
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