Ford’s India Comeback Plans: New Details Surface
Will Ford come back to India? This is a question that’s been around for nearly a year now, and there are various indications that lead us to believe that the American car giant is indeed plotting an Indian comeback. While we’ll get into those indications in just a bit, here are fresh details about Ford’s plans to make a comeback into India.
A source-based report on the EconomicTimes states that Jim Farley, Ford CEO, is reviewing a feasibility report about Ford’s India comeback, and that a decision on the same would be taken shortly. If green-lit, Ford’s Indian comeback will hinge on electric vehicles, exports and re-tooling of the Maramalainagar factory at Chennai.
Meanwhile, were are some quotes from an unnamed Ford source on the American automaker’s India re-entry plans,
Notably, Ford India backed out of selling its Chennai factory to Indian industrial conglomerate JSW, who now has bought controlling stake in MG Motor India, and will soon establish an electric car factory at Odisha. Ford’s other factory at Sanand, Gujarat, has now been sold to Tata Motors.
Enter SMEC!
Ford may reinvest a significant amount of money in the Chennai factory to take advantage of import duty concessions that the Indian government is now offering foreign automakers who set up electric vehicle factories here. The policy is called Scheme For Manufacturing Electric Cars or SMEC.
To qualify for SMEC, Ford will have to invest no less than half a billion dollars (Rs. 4,150 crore as of today) to establish an electric car factory within 3 years. The factory will have to source significant amounts of raw materials/parts from India (25 % in the first 3 years and 50 % after 5 years).
If Ford complies with these requirements, the Indian government will allow the company to import 8,000 electric cars (priced at a minimum of 35,000 US dollars to make sure that domestic industry is protected) into India through the completely built unit (CBU) route each year at just 15 % import duty. This means that Ford will be able to price its electric cars quite competitively, giving it a significant edge in the market.
While the finer details of Ford’s India comeback plans should be out soon, we’ll now take a quick look at what made Ford leave India in the first place.
Let’s get a sense of some history first.
Image courtesy AutoEvolution
Ford entered India in the mid-1990s, with a joint venture with Mahindra. Back in the day, Ford started building and selling the Escort sedan in India. By the turn of the century, Ford split with Mahindra and decided to go it alone. It set up a brand new manufacturing facility in Chennai, and a slew of cars followed.
From the Endeavour and Mondeo to the Fusion and Fiesta, Ford’s Chennai factory began manufacturing and assembling a range of cars, most of which were highly regarded by enthusiasts as great driver’s cars. However, cost of maintenance of these well-built, sturdy cars was quite high thanks to a high amount of imported content, mileage was relatively low, and these cars never really were able to challenge the Marutis and Hyundais of this world.
Ford went back to the drawing board, and brought in a heavily localized version of the previous-generation Fiesta hatchback to India, called it the Figo, and began selling it from 2010. The Figo was a massive success and Ford even went to town claiming that its maintenance cost was actually lower than that of segment leader Maruti Swift. The EcoSport followed in 2013, and Ford was back on track in India.
The all-new Fiesta sedan came in, and flopped. The new Endeavour was launched and it became a big success. The old Fiesta sedan was rebadged the Classic and it sold reasonably well. Ford shifted gears and brought in an all-new Figo hatchback sometime in 2015, and even built a sub-4 meter compact sedan around it, and called it the Aspire. A crossover called the Freestyle followed.
Things began going downhill from here on…
Both cars did reasonably well but this is when things started going downhill for Ford. Ford, buoyed by success of multiple cars, and in a bid to expand Indian operations, spent over a billion dollars to set up a greenfield car and engine manufacturing facility at Sanand, Gujarat. It was from this factory that the new Figo, Aspire and Freestyle rolled out.
I was there when Mark Fields, the new global CEO of Ford inaugurated this spanking new facility at Sanand, with the then-Gujarat chief minister Anandiben Patel. It was a glorious day for Ford India, who was very bullish on Sanand and had big plans for the Indian market as such. But things just didn’t pan out the way the American automaker anticipated.
This factory proved to be white elephant for the automaker as the numbers done by the Figo, Aspire and Freestyle combined never really could help Ford recoup the investments made. Another big bet was exporting cars from this factory, but even that didn’t work out. The numbers just weren’t enough. Globally, Ford began a restructuring exercise, and its Indian operations came under the scanner, for making significant losses.
Not one to give up easily, at least not after spending nearly 25 years in India, Ford did one last roll of the dice. In 2019, it started talking to Mahindra for a joint venture, over 2 decades after it went separate ways. Under the Ford-Mahindra JV, the companies would share platforms, engines and SUVs.
A slew of new SUVs from Ford was to be coming soon, and the future looked bright again. Ford even brought the Mustang to India as a brand builder. The BS6 norms were coming in and Ford anticipated that it would be able to source diesel engines from Mahindra through the joint venture and keep going.
The joint venture talks fell apart, and Ford suddenly found itself in an untenable situation: no new engines. Ford hadn’t really figured a new set of engines for the future as it was relying on Mahindra for that. It was now 2020 and the BS6 norms were nearly here. Ford managed to meet norms.
The 1.5 TDCI diesel motor, a mainstay of Ford’s Indian operations as it powered the likes of Figo, Freestyle, Ecosport and Aspire, was made BS6 compliant. Even the Dragon range of petrol engines went BS6. However, the 1.5 TDCI was on its last legs. An 8 valve, SOHC motor, it had to be replaced, and that would’ve meant massive investments into developing a new diesel motor.
Operating losses were mounting and essentially, it was an existential crisis for the company, from which it could really recover. COVID proved to be the last straw that broke the camel’s back. Ford decided to pack its bags after its Dearborn, Michigan-based CEO Jim Farley decided that enough was enough, and that they had to conserve cash, and couldn’t afford to splurge anymore on the loss-making Indian subsidiary.