At the crack of dawn, Ford Motors broke the news that took the Indian automobile’s growing economy a way back.
Ceasing the operation wasn’t the overnight decision. The rumors were in the air, however, Ford India continued to deny it. On September 9, it announced that the sale of the festive season will be their final operation in India.
The news took thousands of jobs as according to reports there are 40,000 employees 170 dealers with the total investment of INR 2000 crores. It is heartbreaking for the economy as many of the dealers belong to small and medium enterprises.
The real elephant in the room is what compelled such a brand to come to an end?
After the exit of Ford’s rival General Motors and Harley Davidson, there are handful of reasons that coupled to give rise to an unfortunate event. This article will explain each one in the best possible way.
Bitten with the loss of $2 billion
The loss and rapidly compressing market share accumulated to the shutting down of operation of Ford India. Ford Motor Company is spending an incremental 1.7 billion dollars worldwide to reorganize its operations, which incorporates the closure of its Indian business. This comes on atop a $2 billion loss in India so far.
The Indian Taxation System
Taxation plays the greatest role in deciding the fate of markets. This is quite evident by the fact that Tesla has hauled its operations in India due to high customs duties charged by the Indian government. It is time that the taxation department of the Ministry of Finance intervenes with the changes in the policies as it is holding back the growth of the economy. It has an obvious implication as the rise in taxes increases the cost for the company which results in compressing the operation across the market.
Resource generation
With electrification forecasted to be taking up the lion’s share in coming years, companies are fighting for resources. The primary resource, by all means, is money. Every company strives to save as much cost as they can. If they are already bearing a heavy loss, how on earth will they be able to generate additional money for investing in new and profitable projects? This question arose in the brains of the ex-pats and they concluded to haul their operations in loss-making countries.
It’s a place of Maruti
There are a variety of explanations why India appears to be a mausoleum for many automobile manufacturers. No other automotive marketplace on the planet, according to analysts, is as focused as India’s. Multiple considerations – compact car skew, premium prices sensitivity, and Maruti Suzuki Ltd‘s longstanding dominance – make it a difficult market for any automobile company to serve.
Maruti-Suzuki has dominated the Indian automobile market for a significant duration, with a customer base of 48 percent in 2020-21. (Maruti, among many automakers, shed its market share in August due to a variety of factors, primarily a lack of semiconductor chips.) MNC automobile manufacturers, accustomed to markets such as the United States, may not have compact, cost-effective cars fit for the Indian market in their repertoire.
Take a glance at the automotive market – or simply the roadways. Maruti’s Alto has a small number of rivals. The Renault Kwid, Hyundai Santro, and Hyundai Aeon are among the limited endeavors by automakers to enter the market. However, most automakers have struggled to maintain a steady portfolio of India-relevant models.
Fright of China’s competitive spirit
Ford’s resignation is likewise a significant indicator of the sector’s major transformation. For a long time, Detroit has been on the slide. The international automotive sector has been shifting from the Western to the Eastern for more than a decade.
It all began in 2009 when China’s automotive industry overtook the US marketplace, which had been the world’s largest for years. China delivered 19.29 million consumer automobiles in 2020, compared to 14.5 million in the United States. China has gradually advanced not only as a marketplace but also as a production powerhouse.
Ford’s farewell from Indian markets is also a tale of Detroit’s struggle to adapt to the emerging Asia-led economy. Take into account that six Western manufacturers have left India from 2017, notably Harley-Davidson, GM, and now Ford. Fiat, an Italian automaker, also ceased business last year. This is despite the fact that Korean and Chinese companies such as Kia Motors and MG Motors have arrived with large plans.
The pandemic influence
One, this epidemic has wreaked havoc on a wide range of sectors and businesses. Among them is Ford India. In 2019, Ford began discussions with its longstanding ally M&M to form a fresh strategic alliance (the two had previously collaborated to introduce Ford Escort in India in the 1990s). That strategy was not able to withstand an epidemic. Consumer confidence and earnings have taken a blow as a result of the Covid problem, which has harmed vehicle sales.
Decades of losses, continuous sector overcapacity, and a paucity of planned development in India’s automotive market all contributed to the decision to leave.
Conclusion
Ford India was one of the corporations on the table of likely contenders to leave India in the upcoming, according to specialists. The revelation had irritated the corporation at the outset. However, the tale appears prescient in 2021, when it revealed intentions to withdraw.
To really be frank, Ford didn’t strive very hard. In reality, it made a concerted effort to gain a foothold on Indian highways. To boost sales growth, it tried on-again, off-again agreements with Mahindra. It released a good number of merchandise, some of which were moderately successful. From the Ford Ikon in 1999 to the Mondeo, Fusion, Figo, Fiesta, Endeavour, and its finest EcoSport, Ford has produced a wide range of vehicles.
Ford also undertook significant investing in India in order to establish an international presence, as exports could aid the company gain scale, therefore, as a result, pricing dominance in the marketplace. It also employed experts and adopted a methodology to reduce the cost of ownership of its vehicles, which is something that Indian auto purchasers need. Tragically, none of these factors combined were enough to assist Ford to acquire market share in this country.
