American carmakers are not being able to make a mark for themselves in the Indian market. First, in 2017, General Motors called it quits out of India. Then came the turn of motorcycle maker Harley Davidson, which quit India in 2020. Now, automobile manufacturer Ford is leaving India. Ford makes good cars. In the United States, Ford continues to remain a sensation. It has a wide range of car models and trucks sold all over the world. However, there are a variety of reasons why Ford could not establish itself as a major player in India’s resilient automobile market. Almost all of Ford’s failures in India stems from its perception of India as a country whose people can be satiated with five-car offerings alone.
Ford India has announced that the carmaker will ‘restructure’ its operation plans in India. With immediate effect, Ford India will suspend its manufacturing activities in the country. Now, Ford will supply cars to Indians by importing them on request. Ford has two manufacturing facilities in India, one in Tamil Nadu’s Chennai and the other in Gujarat’s Sanand. The American carmaker will wind down its Sanand assembly plant by Q4 2021 while the Chennai facility will stop operations by Q2 2022.
- At just 1.57 per cent market share, Ford ranks ninth on the list of India’s biggest carmakers. Ford sells five models in India – Figo, Aspire, Freestyle, EcoSport, Endeavour – in the price band of Rs 7.75 to Rs 33.81 lakh.
- According to data shared by the Society of Indian Automobile Manufacturers (SIAM), Ford has been operating at just around 20 per cent of the installed capacity of 450,000 units that it has across both its plants in Chennai and Sanand.
- In an official statement, Ford said that with accumulated operating losses of more than $2 billion over the past 10 years, it is now looking to ‘create a sustainably profitable business in India.’
- Ford also confirmed it will still offer some of its premium products like Mustang through the import route and that it will look to bring in new hybrid and full electric vehicles like the Mach-E here. However, cars like Figo, Aspire, Freestyle, EcoSport and Endeavour will cease to be available in India after the sale of dealer inventories by early 2022.
Why did Ford Fail in India?
In India, carmakers must invest energy and resources. Unlike in the United States, Indians will not rush to buy Ford vehicles only by looking at the brand name. The carmaker must prove their worth in the Indian markets, and must devote energy towards popularising their brand in the country by reaching out to the people, offering them quality services and products and not capping the prices of vehicles exorbitantly. Indians have the capability of understanding when they are not receiving value for their money, which is why Ford failed to make its mark in the Indian markets.
Ford merely manufactured five cars in India. Would a company interested in dominating the Indian markets have such a limited portfolio to account for? This shows how Ford never really paid attention to India, and furthered the stereotype of only a certain class of Indians buying its cars. These ranged from the upper middle classes to the affluent. No considerations were made for the lower middle class and middle class, whose staple vehicle choice remains Maruti Suzuki, even while Hyundai is gaining greater acceptance among more and more Indians.
Not just that, Ford did not offer a variety of options even for the affluent section of the society. Take for example, Ford’s Mustang – which is by far its best and most sought-after vehicle was launched in India with merely one version – the GT Fastback 5.0L v8, priced at Rs. 74.61 Lakh. Months ago, the sale of even this model was discontinued. Ford could have challenged German carmakers Audi, Mercedes and BMW in India had it offered more models of Mustang to India. However, Ford took India lightly, and did not offer buyers a variety. So, buyers in turn did not pay heed to Ford.
Why is it that Maruti Suzuki dominates Indian markets? Because they have a car to offer in every segment. Beginning with Alto 800, S-Presso, Ignis, Celerio, Wagon-R and progressing to Swift, Ertiga, Dzire, XL6, S-Cross, Baleno and Vitara Brezza. In India, carmakers need to establish themselves as a reliable choice for buyers. Unless they popularise themselves and are seen as an ‘Indian’ company, they will not succeed. Carmakers like Maruti Suzuki, Tata Motors, Mahindra & Mahindra and Hyundai have excelled in this exercise.
The Indifference of Ford
Ford never really took India seriously. It launched select models in India, thinking Indians simply do not have the capacity to buy its premium models. Surely, Ford is a favourite of American patriots and people in the United States buy vehicles of the company simply looking at the brand. That strategy was bound to fail in India. Ford failed to devise an India-centric strategy, leading to it registering losses which ballooned to $2 billion in the past 10 years.
Anurag Mehrotra, president, and managing director of Ford India said, “The decision (to exit India) was reinforced by years of accumulated losses, persistent industry overcapacity, and lack of expected growth in India’s car market.” It is quite intriguing how “industry overcapacity” is something experienced by Ford alone. Carmakers who are dedicated to India and want to grow in the country’s markets are not citing “lack of growth” in the car market as a reason for their performance. Instead, they are continuously taking steps to overcome whatever challenges they face, and are succeeding while at it, since more and more Indians are diversifying their automobile choices.
Ford’s exit from India should serve as a reminder to all carmakers – they must earn their place in Indian markets. Simply having a brand name, which has a crazy fan following in some countries of the world will not ensure your success in India. One must programme their strategies in India uniquely and convince buyers that their products are worth it.