In a recent announcement, Ford said that it has accumulated operating losses of over $2 billion over the last ten years and in 2019 it recorded an $800 million write-down of assets.
With this, Ford marks its complete exit from the Indian market as it plans to stop its manufacturing immediately in the country. The company expects to record $2 billion restructuring charge after it failed to find a sustainable path forward to long-term profitability.
Ford will wind down its plant for exports in western Gujarat by the end of this year. The automaker’s engine and vehicle assembly factories in Chennai will shut down by the second quarter of next year. This will impact about 4000 employees in India.
In 2019, Ford had exited the Indian market as an independent entity but continued by tying up with their one-time partner Ardour Automotive. With this move, the company wanted to de-risk its business operations so that Indian business does not hurt the main entity. Ford followed what General Motors (GM) did in 2017, however, kept a point of entry that opened up to the Indian consumers.
Another American automaker giant that exited the Indian market last year was Harley-Davidson. Now the announcement by Ford has come as a big blow to the Government of India’s efforts to urge foreign businesses to manufacture locally.
Ford was the only car manufacturer shipping cars from India to the US and they have announced their exit at a time when the government of India is deliberating production-linked incentives for automobiles. The Federation of Automobile Dealers Association stated that about 40,000 employees will be affected at car dealerships across the country.
But why are the American automakers unable to sustain and survive in India?
More often than not, American automakers search their existing brands and products bin and introduce readily available cars. The lack of local and India first business strategies is one of the main reasons for their failure to capture the Indian market successfully.
The American automakers did taste success when they made an India first product such as; Ikon, Ford EcoSport, Chevrolet Beat etc. The concern had been that the American automakers have hardly been at the forerunner of creating a new niche in the Indian car market.
In addition, the American companies USPs do not align with the Indian market needs. The US companies find it difficult to do cheerful, cheap, and value-based products. This was one of the reasons, why Harley-Davidson could not sustain its growth path in India.
Moreover, the Indian automobile market is ruled by Suzuki, which reins more than 50 percent of passenger vehicle sales with low-priced vehicles. The automakers who have been able to create market needs closer to the Indian tastes have survived, for instance- Hyundai. Almost all the top-performing automobiles from these two market leaders are vehicles designed specifically for India.
To succeed in the Indian market, the American automakers will have to spend some time to understand the psyche of the Indian consumer. With different regions, languages, geography, culture, and economics, India needs to be treated like a continent for the automotive business and not as a country.
Additionally, the automakers need to offer something unique or better because providing a similar product as the market leader will fetch no response.