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Ford is following in the footsteps of companies like General Motors and Harley Davidson, to abandon India after recording significant losses.
Ford Motor Co (NYSE: F) plans to stop manufacturing vehicles in India and will shut down production plants. The world-renowned American automaker is the latest in the industry to quit a market dominated by Asian brands. Other US vehicle manufacturers such as General Motors (NYSE: GM) and Harley Davidson (NYSE: HOG) already departed the once-promising Indian market for similar reasons.
Ford made this decision because of its apparent losses, adding that it is not profitable to continue manufacturing vehicles in the South Asian region.
Ford had close to $2 billion in accumulated losses and falling volumes for the last few years. It viewed future sustenance of independent operations as unfeasible and potentially more likely to cause further losses. The US car company’s decision to curtail production in India will likely impact over 4000 employees. Top management already informed staff that it would cut down heavily on the production of popular models in the country. These include the Ford Figo and the Ford Freestyle, among others.
Throughout much of its 25-year stay producing cars in India, Ford competed heavily with low-cost products from other Asian car companies. Suzuki Motor Corp and Hyundai were more successful in winning over India’s frugal buyers. Ford’s overall industry market share in the second-most populous country in the world was less than 2%. Much of this could be attributed to weak domestic volumes, declining exports, and a lack of new products for the domestic market.
Ford to Continue Selling Cars in India Despite Production Shutdown
However, the American automaker intends to continue selling some of its products in India. These include well-known specs like the Ford Mustang and the Ford Endeavor. It will realize this through the import of turnkey vehicles as well as knocked-down units. In addition, Ford would also provide support to dealers in servicing existing clientele. Furthermore, the automaker will retain its engine plant in Sanand and Gujarat.
Ford recently ended its partnership with Indian domestic car makers Mahindra and Mahindra, potentially halting most of its independent operations in India. However, it gave Ford the opportunity to launch new cars faster and with reduced costs and lower investments.
Ford is yet to issue an official statement on these recent developments. Although, the car company previously stated that it would decide on a capital allocation plan for India. It expects to roll this out in the second half of the year. Ford says its capital allocation will be consistent with its objective to generate sustainable and consistently strong cash flow. Furthermore, the car brand hopes to achieve about 8% in company-adjusted EBIT (earnings before interest and tax). This is according to a report from Reuters.
Ford’s Business Center and its product development center for global operation will continue to run. The company sells regular cars under the Ford Brand and luxury cars under its Lincoln luxury brand.