On Thursday, Ford said it will stop manufacturing cars for sale in India with immediate effect, and about 4,000 employees will be affected. It will wind down its assembly unit in Gujarat by the fourth quarter of 2021, and close its engine manufacturing plants in Chennai by the second quarter of 2022
A day after Ford Motor Co. announced its decision to shut down its manufacturing plants in India, a government official on Friday said the American firm’s exit is not likely to affect investor sentiment as its decision is based on operational reasons and not on the business environment in India.
Ford has informed the government about its exit, but has not sought any help from the government yet, he added, requesting anonymity.
On Thursday, Ford said it will stop manufacturing cars for sale in India with immediate effect, and about 4,000 employees will be affected. It will wind down its assembly unit in Gujarat by the fourth quarter of 2021, and close its engine manufacturing plants in Chennai by the second quarter of 2022.
Ford sold 15,818 cars during the April-August period, while Honda Motors and Hyundai Motor dispatched 33,103 and 209,407 units, data released by the Society of Indian Automobile Manufacturers showed.
“India’s automotive growth story is alive both in domestic and export markets. Ford’s decision to end manufacturing is due to competition from Japanese and Korean car makers. Ford’s exit is related to operational reasons and does not in any way reflect the story of the automobile sector or business environment in India. Covid-19 may have also impacted its sales volumes," he added.
The official said more than $35 billion investments have come into India in the last six years, including $4.4 billion in fresh investments by 13 companies. For instance, Toshiba-Suzuki-Denso invested $820 million to start prototype production of advanced chemistry cell battery storage manufacturing at Hansalpur, Gujarat, while US-based lithium-ion battery manufacturer C4V has signed a memorandum of understanding with Karnataka government for an investment of $550 million.
“India is a unique market for automobiles. You need to have a product that people want. Ford failed to assess the market and none of their products was a hit. That’s the main reason for their exit," he added. “Had they come to the government for help, we would have considered it. It is not exiting because of any action or inaction by the government."
“However, they have promised to take care of the employees and customers who have purchased their cars. They are also going to expand research and development in India despite shutting the manufacturing units," he added.