Is Ford closing its doors on India?

Ford India

‘The Indian car market is tough to crack,’ quipped an auto industry executive to me recently, and that is the sentiment floating around with the recent sales slump only worsening that perception.

Ford, one of the first car-makers to enter India and again re-enter the market in 1995 (with Mahindra), is yet again going back to its old partner in a new joint venture. This was revealed some time back, but now more details shows that Ford is making a 'soft exit' from India with Mahindra keeping 51 percent control in the new entity. Ford will get equal voting rights and board representation though.

So, what does this mean? Well, Ford India will cease independent operations in India and its two plants will be handed over to the new entity. However, this also means that unlike Chevrolet, Ford India cars will stay on albeit with future products developed in collaboration with Mahindra.

Ford India

Ford will leverage Mahindra's reach for sales and service while some Ford cars can be sold through Mahindra, though there is no official confirmation on this as yet.

This implies that there would be no independently developed new EcoSport for India; instead a bigger Creta rival might be developed by both Mahindra and Ford together.

Focus on North America

The reason for Ford’s exit is that despite pouring a lot of money into the Indian operations, Ford India has not managed to make inroads into the market and this plan is part of a global restructuring and cost cutting exercise. Also, Ford will shift focus to the North American market, which is where its major profits are.

Others will follow

With the recent sales slump hitting even giants such as Maruti hard, the effect is bigger on the smaller players. Thus, either exiting India or forming partnerships is the only way to survive. Apart from Ford, there are others too who would follow soon, as their sales have hit an all-time low.

Market dominated by Maruti and Hyundai

The Indian market is dominated by the Maruti and Hyundai Group (Now with Kia added), thus leaving little room for others. The biggest challenge is for foreign car-makers to gauge the Indian market trends and make cars according to cost concerns. Most car makers struggle with localisation and developing products for the Indian market. The Indian market has huge potential but only once its read correctly.