Ford rethinks exit; Govt must cash in on the decision

Does Ford intend to stay in India remains the billion-dollar question? There are reports that the American car major has walked out of a potential deal with the JSW Group for the sale of its (Ford’s) Chennai plant. The discussions were said to be in a very advanced stage. The speculation is that the auto company has abruptly cancelled the deal talk because it is reassessing its 2021 decision to leave India. If that is right, then Central and Tamil Nadu governments should leave no stone unturned to keep Ford stay invested in the country.This is a window of opportunity in here that can provide a big impetus to not just the auto sector but manufacturing in general. It may be recalled that Ford was the fifth car company—after MAN Trucks, General Motors, Harley Davidson, and UM Motorcycles—that quit India. This was the result of many failings on the part of the authorities’ obsession with electric vehicles.This obsession was in direct proportion to the government’s enthusiasm to replace the conventional, carburetor-based vehicles with the electric ones.

In September 2017, a prominent Union Minister said that he would “bulldoze” the auto sector.Then there were policy flip-flops that confused and confounded the captains of industry. Antipathy towards the sector also resulted in high taxation. This led to a huge slowdown in the auto sector, hitting lakhs of direct and indirect jobs. The government remained unfazed. In September 2021, around the time when Ford announced to shut shop, an unnamed government official was quoted as saying, “India’s automotive growth story is alive and growing both in domestic and export markets. Ford’s exit is related to possible operational reasons and does not in any way reflect the business environment in India.”Of course, Ford’s problems in India were well known—weak demand, its inability to compete in the country where low-cost cars sell the most, and failure to have a joint venture with Mahindra & Mahindra. But the policy framework too was unsupportive to stay invested here. Now that the UScompany is reportedly reassessing its decision to exit, the powers that be have a chance for a course correction.

In the decade preceding its departure in September 2021, Ford’s accumulated losses were over $two billion, but in 2022-23, it earned profits of Rs. 505 crore from vehicle and engine exports. Yet, it closed vehicle manufacturing operations.Evidently, the spurt in the domestic EV market is forcing a rethink on Ford India’s exit. Besides, India itself is a huge market. It is also the largest tractor producer, the second-largest bus manufacturer and the third-largest heavy truck maker in the world. The sector contributed 2.77 per cent of the GDP in 1992-93, which has now grown to around 7.1 per cent.

According to official estimates, the sector employs about 19 million people directly and indirectly.Ford was selected for the productive linked incentive or PLI Scheme, but it exited out of the scheme in May 2022. A news report talked about “activity at the Ford factory in Chennai” and recently “certain appointments” by the company. Hopefully, the activity will grow into full-fledged manufacturing, resulting in massive recruitment.