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New Delhi: It’s been seven months since Ford decided to shut down its factories in India, demanding $2 billion to back out. The decision was not surprising: Contrary to Ford’s 2012 expectation that the country’s growing middle class would make it one of the company’s top three markets by 2020, its market share had fallen below 1.5% when it decided to pull the pin. .
Ford, meanwhile, invested heavily in two factories near India’s south and west coasts that produce cars and SUVs for both the domestic market and exports. But it racked up losses of more than $2 billion in a decade, unable to crack a price-conscious market dominated by budget cars and two-wheelers.
Now there could be a chance to compensate at least some of these losses. The Tamil Nadu provincial government is in talks with Ford to see if the plant there can be turned into a factory that produces and exports electric vehicles, the Economic Times reported last week. Ford also told the newspaper it was “exploring the possibility of using the plant in India as an export base”.
This could very well turn out to be a smart move. While it’s difficult for US auto giants to make a meaningful entry in India — General Motors stopped selling in India five years ago — electric vehicles could offer another way to reach a market of 1.4 billion people.
This option is especially promising given that Maruti Suzuki, Suzuki’s local unit that sells one of every two cars on Indian roads, does not offer any electric cars.
The market is small, only 1% of total sales, but the growth is staggering. Retail sales of electric cars and SUVs jumped 324% last month, according to data from the Automobile Dealers Association. This compares with a 7.8% decline in overall passenger car sales.
India, home to the world’s most polluted cities, has pledged to become carbon neutral by 2070 and is taking steps to become greener. Ford is among the companies that will receive government subsidies under a scheme related to the production of electric vehicles, motivating the automaker to return with a new avatar.
It can also provide lessons for other car manufacturers. GM’s plant in India has been idle for years, and a union representing former workers has blocked a deal to sell the plant to China’s Great Wall Motors.
Ford has brought some very successful products to India – like the Figo hatchback, EcoSport compact SUV and Endeavor premium SUV. But it will be hard to compete with Maruti and South Korea’s Hyundai in a country where bare-bones cheap cars are traditionally the choice of the emerging middle class buying their first vehicle.
There are signs that change, especially for premium models. Mercedes-Benz plans to launch the locally assembled EQS – an electric version of its flagship S-Class sedan – this year, while BMW is unveiling a host of electric products in India. Elon Musk has run an unsuccessful campaign for the government to lower import tariffs so Tesla can enter the market.
But Prime Minister Narendra Modi’s focus is clear. Under the Make-in-India programme, it wants automakers to set up factories in India to sell locally and export. This is where Ford’s opportunity lies. –Bloomberg
Read also: First GM, now Ford – why India is becoming the graveyard of the world’s auto giants
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