Ford Reconsiders Its Production in India Shortly After Stopping Production

The Ford EcoSport is no more, not that it was a hit with consumers or critics. Still, those who were considering next year’s model are out of luck. Ford announced its plans to shut down two plants in India where the EcoSport, among other vehicles, was being manufactured. However, Ford executives have rethought this decision and announced plans to resume production.

Ford is suspending operations in India

The Ford logo seen in Kolkata, India, where the American automaker just announced it was ending car production operations
The Ford logo | Indranil Aditya/NurPhoto via Getty Images

India has long been seen as a growth market for the automotive industry. With rising GDP and personal incomes, more citizens have the disposable income to spend on motor vehicles. India is also strategically positioned in Southern Asia as a distribution hub to neighboring countries.

Ford established assembly plants in Sanand and Chennai years ago. However, as The Street reports, the automaker has lost money each year on them over the past decade. Having sustained operating losses of more than $2 billion since 2009, in Sept. 2021, Ford announced plans to close down the Sanand vehicle assembly plant by the end of 2021 and the Chennai plant by Spring 2022.

These closures didn’t mean that Ford was completely divesting from India. Even with the closures, Ford would have retained some 11,000 employees in the country. Those employees would have focused on producing engines for export and parts production. To ensure that Indian consumers still had access to Ford vehicles, the company also announced plans to import certain vehicles.

With the announced closures, Ford also announced that they would discontinue the Aspire, EcoSport, Endeavor, Figo, and Freestyle. However, they’d continue its plans to manufacture a broad range of new EVs and EV technologies, with much of that latter work still centered on remaining Indian production facilities.

Will Ford restart production?

Despite its announcement and wind down efforts, Ford recently announced they intended to resume vehicle manufacturing in India. Though this is great news for those who’d been laid off or were facing layoffs in Sanand and Chennai, it was likely quite surprising. Closing a plant and unwinding operations is no small decision. It takes effort and time and costs money, not to mention starting up import operations to shore up sales inventory.

So, why then, with vehicle manufacturing operations drawing to a close, would Ford suddenly decide to reopen these operations? The answer lies in a $3.5 billion production-linked incentive (PLI) policy designed to provide incentives such as tax rebates to automotive manufacturers investing in clean energy technology.

Some time ago, Ford had announced plans to electrify its fleet. In its announcement of the Sanand and Chennai plants, Ford noted a $30 billion global investment in hybrid vehicles and EVs. So, the company applied to participate in the PLI program and announced the Indian government’s approval in February.

Ford’s future operations in India

Given the incentives now being offered, Ford plans to manufacture EVs in India to export to the United States. The company has not ruled out selling these vehicles in India as well. However, market conditions would likely need to change considerably for that to happen.

In India, Ford had been manufacturing EVs and hybrids for sale locally. However, as Reuters reported, the company’s losses stemmed in part from lower than average expected growth and fierce competition in the domestic market. Those conditions have not changed, but Ford projects it can leverage its existing operations and workforce to build EVs and hybrids in India and ship them to the U.S. profitably.

Given that Ford is racing the clock to meet its self-imposed goal of electrifying 40% of its fleet by 2030, it must take advantage of any opportunity to develop EVs and hybrids inexpensively. While the PLI rebates may help, Ford has not finalized a decision as to which of the two plants it will reopen nor which vehicles it will manufacture when it resumes operations yet.

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