Ford’s India return delayed: Is the carmaker making a U-turn or just a pit stop?

There was supposed to be a grand comeback. A roadmap. A blueprint. Instead, there’s radio silence. Ford Motor Company, which announced its return to India last September, now appears to be pumping the brakes on those plans. The much-anticipated January announcement detailing Ford’s India strategy never arrived. Now, sources say, the American automaker is re-evaluating its move and will not reveal a final decision before late summer.“The company’s board discussed the matter in January and decided not to make any announcements right now,” a senior official familiar with the matter told ToI. “There is definitely a delay, and the company is using the time to do a rethink of its India strategy.”

When contacted, a Ford spokesperson maintained that the company remains “committed to utilizing the manufacturing capabilities in Chennai to serve global markets.” However, beyond that, there was little in the way of fresh details.

Ford facing a roadblock or is it rethinking?

Sources suggest multiple factors are at play in Ford’s decision to slow down. First, political winds in the US are shifting towards domestic manufacturing, with Washington pushing automakers to bring production back home. That could make foreign investments—especially those as hefty as Ford’s India revival—less appealing.

Second, the company’s Chennai plant, located in Maraimalainagar, is in dire need of an overhaul. If Ford intends to retrofit it for electric vehicle (EV) production, the price tag could be anywhere between $100 million and $300 million. That’s no small sum, particularly given the turbulence in the global EV market.

Ford had initially pledged its commitment to India, with Kay Hart, president of Ford International Markets Group, calling the Chennai plant a vital piece of the company’s global export strategy. However, even the Tamil Nadu government had previously indicated that Ford’s India plans were still fluid. The company was supposed to take a final call in December, but that uncertainty has now spilled over into 2024.

Ford’s rocky road in India

Ford’s history with India has been anything but smooth. The automaker first exited in 1953 due to import restrictions. It returned in the mid-1990s, lured by the promise of a booming middle class and a liberalised economy. At the time, foreign carmakers were bullish on India, expecting the country to replicate China’s meteoric rise.That never quite happened.

Despite being in India for over two decades, Ford never managed to crack the market. By the time it pulled the plug in 2021, it had amassed $2 billion in losses and controlled less than 2% of the passenger vehicle segment. Its exit followed a familiar pattern—General Motors and Harley-Davidson had already walked away, unable to gain a foothold in a country where compact, fuel-efficient cars rule the roads.

India’s auto market: A prize worth fighting For?

Ford’s 2021 departure raised concerns about India’s business climate, with some questioning whether the country’s automotive growth story had lost its sheen. However, the success of newer entrants like Kia Motors and MG Motors has proven otherwise.

The Indian market remains a massive draw for global automakers, but it demands a highly localised approach. Companies that misread consumer preferences—especially the demand for small, affordable, and fuel-efficient vehicles—have struggled. Ford’s reliance on larger models like the EcoSport and Endeavour, rather than affordable hatchbacks, put it at a disadvantage against domestic players like Maruti Suzuki and Hyundai.

Industry analysts note that while India was once expected to become the world’s third-largest car market by 2020, sales have not met those projections. Instead of reaching 5 million units annually, sales remain stuck at around 3 million, trailing behind Europe and Japan. Even so, India’s potential remains undeniable—especially with the country now aggressively pushing for EV adoption.

For now, Ford appears to be weighing its options. The company’s reassessment suggests that its India comeback is not off the table, but neither is it a done deal. If Ford ultimately commits to reviving the Chennai plant, it will likely do so with an export-heavy focus rather than aiming for a large domestic market presence.

However, delays come with risks. The longer Ford waits, the more challenging it may be to regain lost ground in a market that is evolving rapidly. Competitors are ramping up EV production, the government is offering incentives for local manufacturing, and consumer preferences are shifting.

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