Ford is one of the largest automakers in the world, and the reason the brand got that large is that it has been successful in various vehicle segments. The Ford F-150 truck spent decades as the most popular vehicle in America, and Ford has expanded globally to offer different cars to suit other economies. However, things do not always go so well for the automaker.
Occasionally large companies like Ford invest in opportunities that it bets will pay dividends at a later date. Such as expanding to a new region or building a vehicle that caters to a segment they previously did not serve. In essence, those investments are calculated gambles. Recently Ford realized that one of their biggest gambles would pay off.
Ford to stop building cars in India
Ford has announced that it will cease building cars in India after spending 25 years in the country. According to a Reuters report, Ford is the latest automaker to leave that market which Asian competitors currently dominate.
The American carmaker originally entered India in 1996 but currently commands less than 2% of the passenger vehicle market in the country. The brand has struggled all this time to attract Indian customers.
Ford initially had a good reason for entering the Indian market. In 1991 the Indian economy was liberalized. India’s government encouraged investors to put their money into what they promised would be a growing middle class. It was also believed that middle-class growth would lead to a significant rise in fuel consumption. That was seen as a sign by automakers that the country was primed for green-field investment.
Forecasters speculated that the increase of disposable income for the middle class would help foreign automakers achieve up to a 10% market share. The reality is that never happened.
“Companies invested on the fallacy that India would have great potential and the purchasing power of buyers would go up, but the government failed to create that kind of environment and infrastructure,” said Ravi Bhatia, president for India at JATO Dynamics, a provider of market data for the auto industry.
Ford loses 2 billion dollars from Indian venture
Ford announced in a statement that after 25 years in the country, it will stop making cars in India. The automaker analyzed their presence in India and has estimated that they have accumulated losses of more than 2 billion dollars over the last 10 years of operation in India.
“Despite (our) efforts, we have not been able to find a sustainable path forward to long-term profitability,” Ford India head Anurag Mehrotra said in the statement.
Ford has also recently pulled operations out of Brazil, where it is estimated they lost 12 billion dollars.
The Reuters report speculates that this move by Ford “underscores” the need for global automakers to put more resources into electric vehicles as well as connected vehicle technology.
Another reason for Ford’s failure seems to be their inability to compete with Suzuki’s dominance in the country with their inexpensive small cars that are fuel-efficient and can handle rough roads without the need for pricy repairs.
It is unclear if Ford will pull out of other foreign markets, but if it hopes to have the resources to continue building on its electric vehicle offerings, it will need to stop any financial bleeding it finds and fast.