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Ford To Stop Manufacturing In India, Know Why

Ford has been struggling for years to make a mark in India’s automotive market.

File photograph of the Ford badge (Photo Credit: Instagram/Ford)

New Delhi: Ford Motor Co would close its two manufacturing units in India and sell only imported vehicles as part of a restructuring effort. The company will stop selling vehicles including the EcoSport, Figo, and Aspire, which are produced at its Chennai (Tamil Nadu) and Sanand (Gujarat) plants, where it invested around USD 2.5 billion.

Going ahead, it would only sell imported vehicles like Mustang in the country. A formal announcement by the company is expected soon.

Why Is Ford Exiting India?

Ford’s decision to leave India was taken as a part of a restructuring move, where the company will shift to imported vehicles, PTI quoted a person in the know of the development.

The restructuring was planned following accumulated operating losses of more than $2 billion over the past 10 years and a $0.8 billion non-operating write-down of assets in 2019.

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Ford has been struggling for years to make a mark in India’s automotive market. Ford India has an installed manufacturing capacity of 6,10,000 engines and 4,40,000 vehicles a year. It also exported its models such as Figo, Aspire, and EcoSport to over 70 markets around the world.

End of Collaboration With Mahindra & Mahindra

In January this year, Ford Motor Co and Mahindra & Mahindra had decided to scrap their previously announced automotive joint venture and instead chose to continue independent operations in India.

In October 2019, the two companies had announced an agreement under which Mahindra & Mahindra would acquire a majority stake in a wholly-owned arm of Ford Motor Co (FMC) that will take over the automotive business of the US auto major in India.

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The new entity was to develop the market and distribute Ford brand vehicles in India while also selling both – Mahindra and Ford – cars in the high-growth emerging markets.

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As part of the agreement, M&M was to acquire a 51 per cent stake in a wholly-owned arm of the US auto major — Ardour Automotive Private Ltd, presently a wholly-owned subsidiary of Ford Motor Company Inc, the USA for around Rs 657 crore. The balance 49 per cent equity shareholding in Ardour was to be held by FMC and/or any of its affiliates.

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The new venture was also envisaged to acquire the automotive business of Ford India Pvt Ltd (FIPL), a wholly-owned subsidiary of FMC, that has been engaged in the automotive business in India since 1995.

The automotive business which was to be acquired included vehicle manufacturing plants of Ford India at Chennai and Sanand but excluded the separate powertrain facility in Sanand, which is essentially used for FMC”s global markets, and the powertrain division of FIPL also did not form part of the deal.

Ford Becomes Second American Auto Major to Leave India

Ford is the second American auto major after General Motors to shut plants in India.

In 2017, General Motors announced that it would stop selling vehicles in India as there was no turnaround in its fortunes here even after struggling for over two decades to make a mark. 

The company sold its Halol plant in Gujarat to MG Motors, while it continued to run its Talegaon plant in Maharashtra for exports but ceased production there last December.

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