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    Baxia Markets
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    September 18, 2021

    Ford closes operations in India.

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    Ford took a $2 billion hit to stop making cars in India, following compatriots General Motors Co (GM.N) and Harley-Davidson Inc (HOG.N) in closing factories in the country.

    Sales have stagnated at about 3 million cars. The growth rate has slowed to 3.6% in the last decade versus 12% a decade earlier.

    Analysts and executives said foreigners badly misjudged India's potential and underestimated the complexities of operating in a vast country that rewards domestic procurement.

    Many failed to adapt to a preference for small, cheap, fuel-efficient cars that could bump over uneven roads without needing expensive repairs. In India, 95% of cars are priced below $20,000.

    Lower tax on small cars also made it harder for makers of larger cars for Western markets to compete with small-car specialists such as Japan's Suzuki Motor Corp (7269.T) - controlling shareholder of Maruti Suzuki India Ltd (MRTI.NS), India's biggest carmaker by sales.

     

    Ford Sept 16 2021


    Ford had excess capacity at its first India plant when it invested $1 billion in 2015. It had planned to make India an export base and raise its share of a market projected to hit 7 million cars a year by 2020 and 9 million by 2025. But the sales never followed, and overall market growth stalled. Ford now utilizes only about 20% of its combined annual capacity of 440,000 cars.

    Ford planned to build compact cars in India for emerging markets but shelved plans in 2016 amid a global consumer preference shift to SUVs to use its excess capacity.

    After sinking $2.5 billion in India since entry and burning another $2 billion over the past decade alone, Ford decided not to invest more.

     

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