“Despite investing significantly in India, Ford has accumulated more than $2 billion of operating losses over the past 10 years and demand for new vehicles has been much weaker than forecast,” Farley said.
Ford’s India head, Anurag Mehrotra, said that the unit has not been able to find a “sustainable path forward to long-term profitability that includes in-country vehicle manufacturing.” He added that the decision was “reinforced by years of accumulated losses, persistent industry overcapacity and lack of expected growth in India’s car market.”
Two Ford plants in the cities of Sanand and Chennai will shutter in the coming months and the company will “work closely” with employees affected by the closures.
Even with those challenges, the decision to end production surprised some industry experts.
“It has come as a shock since they had invested so much in India,” said Hormazd Sorabjee, editor of Autocar India. He attributed Ford’s problems to the company’s inability to “get the Indian psyche,” saying that the automaker had spent money in areas that customers did not appreciate.
“It is built like a Taj Mahal,” he added. “The western manufacturers just don’t think frugal.”
“While India appears to be a very promising market from outside, it is also a really tough one,” said Ruchit Agarwal, co-founder and CFO of CARS24, an online marketplace for used cars. He called the market “price-sensitive,” adding that the average selling price of a new car is about $10,000.
That cheap car market is “locked by a handful of manufacturers” who have figured out how to operate in Asia’s third largest economy, Sorabjee said.