why Ford motors is shutting its operations from the world’s biggest auto market?| Ford India exit?

Due to some lending issues or debts, sometimes it is possible that a shop on the main street of a city will be shut down, but is it possible for the huge mall to shut its operations? In the same main street area, that area market, which accounts to 60% of the total sales of the city.

The same has happened to Ford motors in India, they are as big as a huge mall, in the Indian automotive industry, but just like any small business, ford is also facing some constant losses in the Indian automotive market, which forced it to shut its operations completely in India. 

As per the company statements all These operations are decided to shut, because of constant losses of more than $2 billion dollars (more than 2,000 crores) from the last 10+ years in a row to the company Indian market balance sheets. These losses are the combinations of accumulated operational losses and non-performing writer down of company assets in 2019.

How can any company that is a dominant carmaker in the American market can be a loss-making company in India?

This is possible because of 2 reasons, one is purchasing power parity difference of Indian against America and according to market differences Ford companies failed efforts to make the customers friendly priced models, and the second reason can be the fears market to ford motors India from some regional players like Tata, Mahindra and global players like Honda, Toyota, etc.

Can any huge company all of a sudden shut all of its operations, how is it possible?

This isn’t possible in countries like  Japan, China, Brazil, Indonesia, Malaysia, and Mexico, and Russia all of sudden because of those counties laws, which prevent certain sectors companies, to shut their operations overnight because of its huge employees base and so the sudden income and job effects of all this direct or indirect employees for that company or sector. 

In the above-mentioned countries, the companies have to pay adequate exit amounts to the dealers, employers, if they want to all of sudden, shut their operation for that country, but this ain’t the law in India, through the FADA, the Federation of Automobile Dealers Associations, India is constantly recommending the Franchisee Protection Act amendment to the union governments of India.

Due to the lack of this law, just like ford now, some major auto sectors like General Motors, Man Trucks, Harley Davidson, UM Lohia had all of sudden shut their operations in India, giving ford motors a 5th runner up position since 2017.

What is the effect of this sudden exit by ford motors on the Indian economy?

The economic impact is going to be huge as ford motors have direct 4,000 employees to its 2 factories in India at Chennai (Tamil Nadu)  and Sanand (Gujarat). And along with them, as per one report around 40,000 people who are somehow connected with ford India, in the form of dealers and sub-dealers, sales peoples with ford will be impacted overnight, which accounts for almost 170 dealers who’s having 391 outlets and have invested almost Rs 2,000 crore for setting up their dealerships with ford India, and as per one report, ford India too was constantly expanding its dealers until this April 2021 means just 5 months from today.

Though the company has clarified it will maintain parts depositaries in cities like Mumbai, Delhi, Sanand, Chennai, and Kolkata and will work closely with its big dealer network to restructure and help in facilitating their transition from sales, service to parts and service support for the ford products in a long way after the exit from the Indian market.

How big were Ford motors in the Indian auto segment?

The company made its entry in the Indian market in 1995 in a joint venture with an Indian partner Mahindra group, after the implementations of the globalizations reforms in India, this joint venture lasted for around 4 years, after which ford India launched its successful till date model ikon, which was appealed to young India of 90s era and whose production they continued till 2011 too, along with this though ford had introduced several other new and innovative models too but ford couldn’t find that sales glory again in the Indian market, and so the operations very constantly into loss in the last 10 years.

Through its market share chunk was decreasing to just 1.57 percent in recent times, ford was ranked at 9 the biggest carmaker in the Indian auto industry, with 5 models like Figo, Aspire, Freestyle, EcoSport, Endeavor in the ford India showrooms as of now, who were priced between the Rs 7.75 to Rs 33.81 lakh ranges.

Though the company was in discussion for 2 years between 2018-2020, with the Mahinda group again for the joint venture, these discussions parted away as the corona pandemic stuck and Mahinda decided to venture into their investment towards their own electric mobility programme.

What are the takeaways from this problem for everyone?

The government needs to make moves to have strict laws of the big companies sudden exit from the market and The new ford customers need to be cautious about the next purchase and allies facilities by Ford India. 

This is it, for now, hope the governments along with private companies collaborations will take new and innovative measures to increase the employment rates of India, till then.

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