9/9 message from Ford: Will there be knock-on economic effect?

On 9th September 2021, Ford India announced it is restructuring its domestic operations meaning discontinuation of all the models and closing of the plants in Tamil Nadu and Gujarat and it is a clear exit from Indian automobile market.

Source: https://tetofficial.com/fords-exit-from-india-reasons-and-implications/

After General Motors and Harley Davidson, Ford is the 3rd US auto company to stepout from the Indian market. Such exits will have a knock-on economic effect since the resale value of cars nosedive after a manufacturer’s exit. There have been enough wrangling about this multinational withdrawal from the Indian market. Few opinions say that Ford has not focused on designing an appropriate market penetration strategy as the same has been tried by other companies.

As we know Indian car market is dominated by small cars for many years around. Mileage and functionality are the major factors which an average Indian consumer look for. But the company focused on engine power and performance. These are the characteristics which are more appreciated in the western countries. The editor of Auto car India Mr. Hormazd Sorabjee,  said that the mind-set of western manufacturers is different and that they don’t understand the cost structure required to succeed in the Indian market.

Lack of variety may be another reason for stagnating sales. The company was focusing on the brand and icon where other companies were focusing on bringing different models with lot of iterations for meeting the demand and expectation from various segment of customers.A survey report says, the company had around USD 2 billion of accumulated loss over 10 years.

Source: https://tetofficial.com/fords-exit-from-india-reasons-and-implications/

In this way neither the macro situation helped the company to manage the loss situation. It seems, in the global market that there is some scarcity of semi-conductor chips which is due to supply chain problems because of pandemic situation. The demand for the semiconductor chips were increased for the reason of increase in sales of computer and other electronic devices. Few companies like Mahindra and Mahindra , Maruti-Suzuki Toyota have reduced their production because of such component issues.

Source: https://tetofficial.com/fords-exit-from-india-reasons-and-implications/

Ford never had any substantial existence in the Indian market, since most of the market share being dominated by Korean and Japanese carmakers. However, they were able to sell their Eco Sport and the Endeavour which are considered as their popular models.

While the decision will not significantly affect the competitor prospects, but the withdrawal from the market will affect the livelihoods of around 40000 employees. This will definitely hurt the economy, because India is already amidst of pandemic situation will foresee increase in unemployment due to this reason 

There are number of multinational companies stopped operations in India in recent times due to similar factors. Ford is now working on expanding its business solutions operations. This new area will focus more on Engineering and Technology, wherein the chances for people across different fields to utilize their talent and opportunities are on the higher side.

Dr. Karpagavalli. G
Assistant Professor,DSCE- MBA


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