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 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.
We love to hear new ideas from traders and want to know what you think!
If you like this topic and want to suggest future topics that you find helpful, let us know by clicking the ‘submit your feedback’ button below.
Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite.
Nothing contained in this website should be construed as investment advice. Any reference to an investment's past or potential performance is not, and should not be construed as, a recommendation or as a guarantee of any specific outcome or profit.
