On Thursday, September 9, US-carmaker Ford announced that it would end its operations in India and take about $2 billion because the company does not see a future in the country. It is the latest automaker to exit the country. Earlier General Motors and Harley Davidson exited the country.
After 25 years of its existence in the Indian market, Ford could only manage a consumer base of less than 2 per cent. The company said that it had incurred operating losses of $2 billion in the last decade, and the demand for new vehicles has been weak.
The automaker announced that though it is ending operations in the market, it would not be exiting India entirely and would now focus on creating a 'sustainably profitable' business in the country. In the official statement, the company mentioned that it had decided after trying every possible method to come out of trying. Ford had approached Indian carmaker Mahindra and Mahindra to ink a deal for producing cars.s However, not much progress was made. The deal would have given a lease of life to the company and thereby reduce operational costs.
Exit To Impact Almost 50,000 Jobs Directly
The carmaker's decision is estimated to impact nearly 45,000 to 50,000 jobs, including vendor factories, dealers and workshops. The Times of India quoted the official statement and mentioned that "Ford will work closely with employees, workers, unions, suppliers, government and other stakeholders in Chennai and Sanand to develop a fair and balanced plan to mitigate the effects of the decision".
Post-2010, India has seen a significant investment in the automobile sector. In 2015, experts had predicted an investment of $10 billion in the upcoming years. Domestic automobile production grew at a 2.36 per cent compound annual growth rate (CAGR) between 2016 and 2020. The India Brand Equity Foundation (IBEF) reported that in FY 2019-20, automobiles were as high as 21.55 million. The government of India heavily encourages foreign investment in the automobile sector, with 100 per cent foreign direct investment under the automatic route.In July 2021, India inaugurated the national automotive test tracks (NATRAX), Asia's longest high-speed track to facilitate automotive testing. In Union Budget 2021-22, the government introduced the voluntary vehicle scrappage policy, likely to boost demand for new vehicles after removing old unfit vehicles currently plying on the Indian roads.
What Is India Looking At In the Automobile Sector In The Next Five Years?
Ford is the third US automobile company to announce its exit from the Indian market, thereby giving Asian companies like Maruti Suzuki and Hyundai, which already hold the majority market share, a more comfortable space. The Indian automobile sector is currently valued at $118 billion and will likely become the world's third-largest automobile market by 2026. Over the past few years, the automobile market has transformed into an electric, automated, shared and connected system. The electric vehicles market has garnered the interest of a large consumer base and is expected to touch the tipping point in the next five years. The Delhi government has already started the Switch Delhi program to spread awareness about moving to electric vehicles.
Artificial Intelligence is growing by leaps and bounds and has made the utopian dream of a driverless car a reality for the times to come. On the one hand, automobile engineers certainly do not want to be the last in the race, where things like home appliances and fitness are becoming connected through the internet. Therefore, several companies have launched the latest editions of vehicles with internet connectivity that keeps their passengers connected to the outside world while on the go. Transformation in the preferences of individual mobility is lifely to influence the automobile industry to re-invent itself.