New Section

This section provides an overview of Ford's decision to shut down its factories in India and the reasons behind it.

Ford's Entry into India

• Ford was one of the first global car companies to enter India when the economy opened up in the early 1990s.

• The company initially set up a factory in India in 1926 but later shut it down due to import restrictions by the Indian government.

• Ford re-entered India in 1995 through a partnership with Mahindra and Mahindra, forming Mahindra Ford India Limited.

Reasons for Shutdown

• Decline of the Indian passenger vehicle market over the last five years, with sales reaching a peak in 2018 and declining since then.

• Accumulated losses of more than $2 billion over the past 10 years, including a non-operating write-down of assets in 2019 alone.

• Weak demand for new vehicles, poor sales, and weak exports, further impacted by the COVID-19 crisis.

• Supply chain issues due to COVID-19 and global shortage of semiconductor chips affecting auto industry worldwide.

• Underutilization of factory capacity, operating at less than 20% capacity due to declining sales and bleak future prospects.

• High tax regime imposed by the Indian government on gasoline vehicles, as well as uncertainties around scrappage policies.

Competition and Partnerships

• Difficulty for multinational automobile companies to gain market share in value-conscious Indian market dominated by Maruti Suzuki and Hyundai.

• Soft exit from partnership with Mahindra after several years without significant results or impact on market presence.

Impact and Future Plans

• Closure of Ford's factories in Gujarat and Tamil Nadu will impact around 4,000 employees.

• Chennai facility to be operational till Q2 2022 and Sanand facility till Q4 2021 for vehicle manufacturing and engine exports.

• Ford aims to expand its workforce in Ford Business Solutions operations, focusing on software developers, data scientists, and R&D engineers.

New Section

This section provides an overview of the reasons behind Ford India's decision to shut down its plant in India.

Decline of Indian Passenger Vehicle Market

• The Indian passenger vehicle market has been declining over the last five years, with sales reaching a peak in 2018 and declining since then.

• Sales in financial year 2020 were lower compared to the previous year, indicating a lack of expected growth in the market.

Accumulated Losses and Weak Demand

• Ford India has accumulated losses of more than $2 billion over the past 10 years.

• In 2019 alone, there was a non-operating write-down of assets amounting to $0.8 billion.

• Weak demand for new vehicles, poor sales, weak exports, and COVID-19 crisis further compounded the troubles faced by Ford India.

Supply Chain Issues

• Global shortage of semiconductor chips and other parts affecting the auto industry worldwide.

• Ford's exit comes at a time when there is an ongoing shortage of semiconductors impacting output.

• High commodity prices have also increased vehicle costs.

Underutilization of Factory Capacity

• Ford's factories had an annual capacity of four lakh units but were operating at less than 20% capacity for many months due to declining sales and bleak future prospects.

Indian Government Policies and Taxes

• High tax regime imposed by the Indian government on gasoline vehicles, with levies as high as 28%.

• Uncertainties around scrappage policies and their impact on vehicle sales.

Competition in the Indian Market

• Multinational automobile companies find it difficult to gain market share in the value-conscious Indian market dominated by Maruti Suzuki's low-value cars.

• Japanese and Korean car makers also have a strong presence in the Indian market.

New Section

This section provides an overview of Ford India's operations, manufacturing capacity, and export markets.

Ford India's Manufacturing Capacity

• Ford India has an installed manufacturing capacity of six lakh engines and four lakh vehicles per year.

• It exports models such as Figo Aspire and EcoSport to over 70 markets worldwide.

New Section

This section highlights the global shortage of semiconductor chips impacting the auto industry and its role in Ford's decision to exit India.

Global Shortage of Semiconductor Chips

• The global auto industry is facing a shortage of semiconductor chips.

• Wholesale auto sales fell 12% year-on-year due to this ongoing shortage, impacting output.

• Demand for chips increased as the pandemic forced people to work from home while supply chains were disrupted by lockdowns and restrictions.

Sales of Ford's Current Vehicles in India to Stop

This section discusses the decision by Ford to stop sales of their current vehicles in India once existing dealer inventories run out. Over 400 Ford outlets in India will be affected, causing financial loss for dealers.

Impact on Dealers and Existing Owners

• Sales of Ford's current vehicles in India, such as Ford Figo Aspire, Freestyle, EcoSport, and Endeavour, will cease once existing dealer inventories are depleted.

• Dealers who have invested 20 billion rupees over time will face significant financial losses due to this decision.

• Existing Ford owners will be impacted by the discontinuation of local production. However, Ford has committed to providing full support for operations with service, after-market parts, and warranty services.

Ford's Presence and Future Plans in India

This section highlights that while local production is being shut down, Ford will continue to have a presence in India through its business solutions team. The company aims to develop India into a larger market by focusing on engineering technology and business operations.

Continuation of Business Solutions Team

• Despite shutting down local production, Ford will maintain a network of dealerships to support the completely built-up (CBU) business. However, customer touchpoints may reduce, especially in smaller towns.

• Ford plans to increase its business solutions team that will focus on engineering technology and business operations to support the company globally.

Shift towards Exporting CBU and CKU Units

• Instead of manufacturing vehicles locally, Ford intends to export completely built-up (CBU) and completely knocked-down (CKD) units from India.

• The company aims to deliver new fully electric and hybrid vehicles, including the Mustang Mach-E, globally using new strategies and support structures.

Restructuring and Future Operations

This section discusses Ford's restructuring plans in India, including maintaining park depots for aftermarket support and keeping the Sanand engine plant operational for global engine exports.

Maintenance of Park Depots and Engine Plant

• Ford will work closely with its dealer networks to maintain park depots in Delhi, Chennai, Mumbai, Sanand, and Kolkata to continue providing aftermarket support for Indian customers.

• The Sanand engine plant will remain open for some time to support global engine exports. Approximately 500 employees will continue operating the plant, primarily producing engines for the globally popular Ranger pickup truck. Additionally, around 100 employees are needed for parts distribution and customer service.

Conclusion

Ford's decision to stop sales of their current vehicles in India will have a significant impact on dealers and existing owners. However, the company remains committed to supporting operations through service, after-market parts, and warranty services. While local production is being shut down, Ford plans to maintain a presence in India through its business solutions team focused on engineering technology and business operations. The company aims to develop India into a larger market by exporting completely built-up (CBU) and completely knocked-down (CKD) units globally. Ford will also maintain park depots for aftermarket support and keep the Sanand engine plant operational for global engine exports.