New Delhi: Ford Motor Co. will shut its car factories in India and record roughly $2 billion in restructuring charges, scaling back significantly in a country that past management saw becoming one of its three biggest markets.
Manufacturing of vehicles for sale in India will stop immediately, and about 4,000 employees will be affected, the carmaker said in a statement Thursday. Ford will wind down an assembly plant in the western state of Gujarat by the fourth quarter, as well as vehicle and engine manufacturing plants in the southern city of Chennai by the second quarter of next year.
“The decision was reinforced by years of accumulated losses, persistent industry overcapacity and lack of expected growth in India’s car market,” said Anurag Mehrotra, managing director of Ford India. “We have not been able to find a sustainable path forward to long-term profitability that includes in-country vehicle manufacturing.”
Ford shares slipped 0.6% before the start of regular trading. The stock has surged 48% this year.
Foreign automakers have found it difficult to gain a foothold in the value-conscious Indian market dominated by Maruti Suzuki India Ltd.’s cheap cars. The government’s high tax regime, which imposes levies as high as 28% on gasoline vehicles, has also been a major roadblock. Toyota Motor Corp. last year said it won’t expand further in India due to high tariffs, while Harley-Davidson Inc. has exited the market. General Motors Co. pulled out in 2017.
The moves by Ford are a further blow to Prime Minister Narendra Modi’s Make-in-India program, which encourages companies to manufacture locally. Tesla Inc. has urged Modi’s administration to allow it to import cars more cheaply before it commits to setting up a factory in the country.
Ford’s moves come months after it dropped a plan to cede most of its Indian operations to local sport utility vehicle maker Mahindra & Mahindra Ltd. Ford India racked up more than $2 billion in losses during the past decade and wrote down the value of its business by about $800 million in 2019.
Ford was one of the first global car companies to enter India when the economy opened up in the early 1990s. The company first set up shop in 1926 but shut down its initial operation in the 1950s.
Following the factory closures, Ford will import and sell some vehicles, including Mustang coupes, but the sale of models including the Figo, EcoSport and Endeavour will cease once existing inventory at dealers is sold.
Ford considered several options, including partnerships, platform sharing and contract manufacturing with other carmakers before deciding to shut down factories in India. It is still considering the possibility of selling its manufacturing plants in the country.- Bloomberg