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Ford Stops Production In India After Loss-Ridden Decade

Ford Motor Company (NYSE:F) will stop making cars in India after reporting losses of around $2 billion in a decade. It becomes the latest car manufact...

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This story originally appeared on ValueWalk

Ford Motor Company (NYSE:F) will stop making cars in India after reporting losses of around $2 billion in a decade. It becomes the latest car manufacturer to leave this market dominated by Asian brands.

Image Source: Ford (screenshot) - Valuewalk

 

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Significant Losses

Ford's decision affects more than 4,000 employees who will be laid off as production will come to a halt immediately. The giant automaker arrived in India 25 years ago but could never seize more than 2% of the market, after struggling for years to win over Indian consumers.

As reported by Al Jazeera, “Ford will wind down an assembly plant in the western state of Gujarat by the fourth quarter, as well as vehicle and engine manufacturing plants in the southern city of Chennai by the second quarter of next year.”

CEO Jim Farley has assured that the measure was “difficult but necessary,” and added in a statement: “We are taking difficult but necessary actions to deliver a sustainably profitable business longer-term and allocate our capital to grow and create value in the right areas.”

“Despite investing significantly in India, Ford has accumulated more than $2 billion of operating losses over the past 10 years, and demand for new vehicles has been much weaker than forecast.”

However, the manufacturer will continue to sell some of its cars through imports and will provide assistance to dealers to offer its service to existing customers.

More Reasons

The move to halt production came after Ford and the Indian company Mahindra & Mahindra Limited (NSE:M&M) failed to close a partnership that allowed the U.S. company to continue manufacturing at a lower cost.

The Federation of Indian Automobile Dealers Associations was surprised by Ford's move, while the latter also represents a setback for the "Made in India" campaign of Indian Prime Minister Narenda Modi.

Ford is not the first American vehicle manufacturer to leave the country, as it follows the steps of General Motors Company (NYSE:GM) and Harley-Davidson Inc (NYSE:HOG).

India was expected to be the third-largest car market in the world in 2020, with 5 million vehicles sold, after China and the U.S. In contrast, sales are still around 3 million, behind Europe and Japan.

Ford is going to increase its investment in electric cars by a third to $30 billion in 2030.

This investment would be directly related to the company's exit from the Indian market, in part due to the great pressure faced by car manufacturers worldwide to invest in automated and electric vehicles.

Ford is part of the Entrepreneur Index, which tracks 60 of the largest publicly traded companies managed by their founders or their founders’ families