Ford could reopen Indian factories in EV push

The auto maker closed car plants in the country last year after they racked up losses of more than $2bn in a decade

Ford cars are assembled at a plant in Chengalpattu, India. The auto maker closed its factories in the country last year. Reuters

It’s been seven months since Ford decided to shut its factories in India, taking a $2 billion charge for the retreat.

The decision was unsurprising: contrary to Ford’s expectation in 2012 that the nation’s burgeoning middle class would propel it to one of the company’s top three markets by 2020, its market share had slumped to less than 1.5 per cent by the time it decided to pull the plug.

In between, Ford invested heavily in two factories near the southern and western coasts of India, manufacturing cars and SUVs for both the domestic market and export.

But it racked up losses of more than $2bn in a decade, unable to crack a price-conscious market dominated by cheap cars and two-wheelers.

Now, there could be a way to recoup at least some of those losses. The provincial government in Tamil Nadu is holding talks with Ford to explore whether its factory there can be converted to a plant for manufacturing and exporting electric vehicles, the Economic Times newspaper reported last week.

Ford also told the newspaper it was “exploring the possibility of using a plant in India as an export base”.

That could very well turn out to be a smart move. While it’s difficult for US car-making giants to make meaningful inroads in India – General Motors ceased sales there five years ago – EVs could offer another opportunity to take a shot in the market of 1.4 billion people.

That option is particularly promising given Maruti Suzuki, the local unit of Suzuki that sells one in every two cars on Indian roads, doesn’t offer a single EV.

The market is tiny, at just 1 per cent of total sales, but the growth is staggering. Retail sales of electric cars and SUVs soared 324 per cent last month, based on data compiled by the Federation of Automobile Dealers Associations. That compares with a fall of 7.8 per cent in overall sales of passenger vehicles.

India, home to some of the world’s most polluted cities, has vowed to turn carbon neutral by 2070, and is taking steps to become greener. Ford is among companies selected to receive state subsidies under a production-linked plan for electric vehicles, incentivising the car maker to possibly return with a new avatar.

That may hold lessons for other auto makers too. GM’s factory in India has sat idle for years, with a labour union representing former workers blocking 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, the EcoSport compact SUV and the Endeavour premium SUV. But it’s difficult to compete with Maruti and Hyundai in the nation, where bare-bones cheap cars are traditionally chosen by emerging middle-class families buying their first vehicles.

There are signs that is changing, especially with premium models. Mercedes-Benz plans to roll out a locally assembled EQS – the electric version of its flagship S-Class sedan – this year, while BMW is also presenting an array of electric products in India. Elon Musk has waged an unsuccessful campaign for the government to cut import tariffs so Tesla, too, can enter the market.