Ford Motor Company’s India Closed Factories Could Be Resurrected as Part of The Electric Vehicle Efforts!
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- After incurring billions of dollars in losses, the American manufacturer pulled out of India last year. Its plants may now get a fresh lease on life.
It’s been 7 months since Ford chose to close its plants in India, and incurred a $2 billion penalty as a result of that decision. The decision was disconcerting: contrary to Ford’s anticipation in 2012 that the country’s increasing middle class would catapult it into one of the company’s top 3 markets by 2020, the company’s market share had fallen to fewer than 1.5 percent by the time it chose to pull the pin.
Meanwhile, Ford has invested extensively in two facilities near India’s southern and western coasts, to manufacture SUVs and automobiles for both the domestic and export markets. However, it lost more than $2 billion over a decade because it was unable to break into the cost market dominated by low-cost automobiles and two-wheelers.
There may now be a way to recuperate a few of those losses. The Tamil Nadu provincial government is in negotiations with Ford to see if its factory there can be turned into an electric vehicle manufacturing and exporting factory, according to the Economic Times newspaper last week. Ford reportedly informed the newspaper that it was looking into the potential of using an Indian factory as an export base.
That may end up to be quite a wise decision. While it is hard for US automakers to make significant gains in India — GM‘s sales have been halted in India 5 years ago — electric vehicles may provide another opportunity to enter the 1.4 billion-person market.
That choice is especially promising given that Maruti Suzuki, Suzuki’s local unit that sells one out of every two vehicles on Indian roads, does not really offer a single electric vehicle.
The market is small, accounting for about 1% of overall sales, however, the growth is astounding. According to figures provided by the Federation of Automobile Dealers Association of India, retail sales of electric automobiles and SUVs increased 324 percent last month. This contrasts with a 7.8 percent drop in total passenger car sales.
India, which has some of the world’s most polluted cities, has pledged to become carbon-neutral by 2070 and is taking measures to become more environmentally friendly. Ford is one of the firms that has been awarded government subsidies under a plan to manufacture electric cars, prompting the automaker to possibly come back with a new avatar.
This may teach other carmakers a thing or two. General Motors‘ plant in India has been idle for years, with a trade union representing former workers opposing a plan to sell the factory to the Chinese Great Wall Motors.
Ford has brought a number of products to India that have proven to be highly successful such as the Endeavour, the EcoSport, and the Figo. However, competing with Hyundai and Maruti in the country, where inexpensive automobiles are traditionally selected by the growing middle class who purchase their first vehicle, is a challenge.
There are signs that this is changing, particularly with luxury vehicles. Mercedes-Benz intends to launch the locally-made EQS sedan, an all-electrified version of its iconic S-Class vehicle, this year, while BMW will also launch a range of electric vehicles in India.
Elon Musk has unsuccessfully lobbied the government to lower import duties so that Tesla could enter the market. But Prime Minister Narendra Modi’s interest, on the other hand, is clear. He wants manufacturers to establish plants in India to produce domestically and export under the Make-in-India initiative. And this is where Ford has an opportunity.