Ford Motor Co will stop manufacturing cars in India and pack up its plants within the country, two sources told Reuters, becoming the newest automaker to quit a market still dominated by Asian rivals.
The US automaker made the choice because it had been not profitable for it to continue, said one among the sources, adding that the method is predicted to require a few year to finish . Ford is that the latest vehicle maker to cease production in India, following US companies like General Motors and Harley Davidson, which have already left a market that had once promised exponential growth.
Ford has struggled to convert India’s frugal buyers and switch a profit during a market dominated by mainly low-cost cars made by Suzuki Motor Corp and Hyundai Motor. The US automaker will still sell a number of its cars in India through imports of fully-built vehicles and knocked-down units, said the person , adding that it might also provide support to dealers to service existing customers.
Ford didn’t immediately answer an email seeking comment. it’s previously said it might choose a capital allocation plan for India within the last half of 2021.
Ford will allocate capital according to its decide to generate consistently strong income and achieve an 8% company adjusted EBIT (earnings before interest and tax) margin, the corporate has previously told Reuters.
The decision to cease local production came after Ford ended its partnership with domestic carmaker Mahindra & Mahindra – a move that might have ended most of Ford‘s independent operations in India but allowed it to launch new vehicles faster, at a reduced cost and with lower investment.
Why is Ford ceasing production?
There are a spread of reasons for Ford pulling the plug on its manufacturing operations in India at Sanand and Maraimalai Nagar plants, but the key reason is that plant capacity utilisation has been unsustainably low. Combined, the 2 facilities have a capacity of manufacturing 4,00,000 units annually, though in recent times Ford has only managed to supply 80,000 cars (20 percent of the capacity), with half those being made to export.
Jim Farley, Ford Motor Company’s president and CEO said via the discharge “Despite investing significantly in India, Ford has accumulated quite $2 billion of operating losses over the past 10 years and demand for brand spanking new vehicles has been much weaker than forecast.”
Such low output figures paired with the very fact that the Sanand plant was originally built to satisfy Ford’s global standards, means it’s been too expensive to form cars for our market profitably at said plant.
In comparison, the Maraimalai Nagar facility did leave less expensive manufacturing. However, even sustaining this single plant where the EcoSport and Endeavour– two of the brand’s hottest models – are made, isn’t financially viable. this is often very true once you consider Ford’s dated India line-up, the low demand for its range and therefore the lack of any new mass market models on the horizon.