Ford faces a tough future in India

Hormazd Sorabjee

With the launch Figo Automatic July and upcoming Eco-sports facelift, As can be seen from numerous spy photos, business as usual Ford India. However, it is nothing more than that. The American brand is facing the biggest crisis in its 25 years of existence in India, because it is staring at a product drought in the next 2-3 years, and there are no new models to be launched. The sharp drop in exports of bread and butter, as well as COVID-19-related disruptions, have exacerbated the company’s plight, and the company is now struggling to use an outdated product portfolio to maintain its operations in India.

  • Ford cannot find another partner in India
  • May end manufacturing operations in Sanand and Maraimalai Nagar
  • Ford’s presence in India will continue to import through niche

Production has fallen to only 80,000 vehicles (half of which are exported), which accounts for only 20% of the 4,00,000 vehicles produced annually at Ford’s Sanand and Maraimalai Nagar plants. Such a low factory capacity utilization rate is unsustainable, which is why Ford India has been desperately seeking another manufacturer to share capacity with other manufacturers, whether through contract manufacturing, joint ventures (JV), or selling its factories. one.

Aside from the pandemic, the biggest blow to this American company was caused by Mahindra and Mahindra (M&M) When a strong partnership that could have been established was suddenly cancelled, it actually put Ford India in a difficult situation.

These companies first started Explore the synergies of 2017, Go one step further, form a handshake Joined the joint venture in October 2019 This envisages a comprehensive partnership. This includes everything from sharing manufacturing facilities and electric vehicle technology to developing multiple platforms and engines for a new range of Mahindra and Ford products. On the surface, this is an excellent alliance that can provide scale and products for the two companies, and each company believes that it cannot be developed independently. So, what went wrong? Both companies are obviously tight-lipped about the details of the breakup, but M&M’s leadership changes seem to have brought changes. According to sources at M&M, concerns about compensation and emissions compliance are red flags raised by the new leadership, but sources at Ford (and even some Mahindra insiders who worked closely with the deal) said nothing beats this. The more serious ones are resolved.

The mistake that Ford made was to go too far on the joint venture route, which was actually just a handshake. “During our discussions, we passed certain milestones based on trust and understanding that these two partners hope to achieve this alliance. We saw Jim Farley and Pawan Goenka The chemistry and quality of the interaction between Dr. Goenka and Dr. Goenka does not give us any reason not to believe it,” said a Ford insider close to the deal. “However, we misread the new leadership and they have a completely different view of cooperation,” he added. Dr. Goenka retired on April 1, 2021, when he was no longer alive.

The problem with Ford is that it doesn’t have a plan B.So when The alliance collapsed on December 31, 2020, And its short- and medium-term product plan is the same.Prior to this, the discussion on the joint development of seven new models has entered a very high stage, including three SUVs in the first phase-a sub-four-meter compact SUV (B744) and a 4.3m long Creta fighter (B772) On Ford’s platform, and C-SUV or 4.5m long SUV (CX757) On the W601 platform that supports Mahindra XUV700. Every brand has to design and develop its own “top hat”. In fact, Ford has outsourced Design and styling of Pininfarina C-SUV, May be launched in the middle of 2022. Ford-based SUVs will be launched in late 2022 and 2023, but the engine will come from Mahindra. In fact, even before the joint venture was proposed, Ford had signed an agreement to use M&M’s mStallion 1.2 turbo gasoline under the hood of the remodeled EcoSport, which is scheduled to be launched in April 2021.

Between Ford and the tough place

Ford India lost three years of precious time because of this flirtation, but in hindsight, it could have used the time and resources to develop its own products. Now, even if Ford wants to inject capital into the Indian market, it is too late. It will take us at least three years to see the new mass market models wearing Blue Oval. The bigger concern is that until then, the current range will not allow Ford to tide over the difficulties. Some models, especially 1.5 diesel engines, need to be upgraded to meet CAFE, BS6 Stage II and other regulations, which requires additional investment. Even the next-generation Endeavour (U704) was also launched, and India ranked last in Asia, the next-generation SUV version. That’s because Ford plans to introduce Endeavour after the C-SUV.

Ford’s best choice is to cooperate with another manufacturer, because cooperation or joint ventures are the prerequisite for cooperation with Mahindra and are the only real opportunity.It is believed that Ford has negotiated alliances with many manufacturers, but the only company that might help is Skoda, MG with Tata Motors. Ford and Volkswagen recently formed an extensive global alliance For electric vehicles, pickup trucks, trucks and autonomous driving technology, it is logical that the alliance expands to other markets such as India. Obviously, Ford contacted Skoda India (on behalf of Volkswagen in India) to explore a partnership, but it is understood that its cost structure is not competitive. “One of the things Mahindra taught us is how to control development costs,” a Ford source said. Tata Motors can also pay for every rupee in development, but will they be a valuable partner? After all, Tata also ended its partnership with Volkswagen quite abruptly. But Ford has what Tata Motors desperately wants-a mid-size SUV to fill the important gap between Nexon and Harrier. Ford’s B772 may be that model. In addition, in the good month of sales of 30,000, Tata Motors may soon have capacity demand, which is the entry point for Ford’s Sanand plant. This may also be a solution for MG India, which requires more production capacity in the short term. However, it is believed that Tata Motors did not show interest.

It is believed that Ford has also worked with Ola And provide its Chennai plant to electric car startups to start operations there, but with a large new plant near Bangalore, Ola does not need capacity urgently.

Finding a partner is easier said than done. Without a partner, Ford may have no choice but to close its manufacturing operations in India. The closure of Sanand is inevitable, because this factory built in accordance with Ford’s global standards has proven too costly to make the car profitable.I hope at least I can continue to be alone with Maraimalai Nagar, there Ecological sports with Forge aheadBoth of these are quite profitable for Ford and are being manufactured. But this brings us back to the core problem-the current model lineup can no longer sustain these factories for three more years.

Ford was one of the first multinational companies to pour into India in 1994, and you would expect it to provide the final blow to the market it was trying to penetrate. The last shot was Mahindra, who felt like he was in Dearborn, Michigan, and his patience with India was exhausted. For Ford, investing in India means investing a lot of money in a terrible market. A Ford source said: “Ford would rather invest $500 million in a new pickup truck or other markets with higher returns.” In addition, frequent and sudden policy changes make doing business here challenging and frustrating. “Deal with regulations such as the ISI mark on the windshield and the BIS mark on the alloy, applicable to small-volume models, such as Mustang It’s really annoying,” he added.

However, unlike General Motors, when Chevrolet withdrew from India, it unplugged Chevrolet, Even in the worst case of the closure of the two factories, the Ford brand will continue to exist in India. Ford India will follow the example of Australia and more recently Brazilian models (where local manufacturing is stopped) and reduce its footprint in the market through imports. A car like a Mustang, Ranger Pickup Truck (There is already a start-up plan for this), future electric cars can be sold in small batches in India.

The Indian auto market is known for its humble giants, and Ford may reduce its sales of niche cars. The good news is that we can finally buy some American Fords!

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