Ford turns to electric vehicles to revive fortunes in India

Just months after announcing to cease operations in India due to mounting losses, American automaker Ford is making a comeback with electric vehicles (EVs) manufacturing by applying for the recently announced production linked incentives (PLIs) scheme by the government. The move could be a win-win situation for Ford and India, finds GlobalData, a leading data and analytics company.

The abrupt end to Ford’s operations had left its assets in India, including two production plants, and nearly 14,000 workers high and dry. This prompted speculations about its assets sell-offs and mass layoffs.

Bakar Sadik Agwan, Senior Automotive Consulting Analyst at GlobalData, comments: “The decision to manufacture EVs in India comes after the recently announced PLI scheme. It presents an opportunity for Ford to place its Indian operations on a more stable footing. However, it will need to influx fresh investments to avail PLI benefits.”

The PLI scheme was announced a few weeks after Ford’s India exit. Under PLI, the government has outlaid sales value linked scheme applicable only for BEVs and FCEVs. The incentive would vary from 13% to 16% for passenger EV makers based on their annual sales value.

Agwan continues: “Ford’s exit from India is widely benchmarked with GM’s exit. GM initially aimed to continue production post-exit but failed to sustain and had to completely cease production in 2020. Later, selling off assets to a Chinese company and layoffs triggered legal battles, making it a rough ending for GM. The strategic reconsideration could be a saving grace for Ford from all such difficulties and prove a cost-effective solution with most of the assets already in place.”

Ford plants in Tamil Nadu and Gujarat had a total installed capacity of 440,000 vehicles. The units were operating at 48.6% in pre-COVID era with 60% of total production done for exports, as per GlobalData.

Agwan concludes: “The plan could also offer Ford opportunities in the local EV market, which is a budding segment and has only a few brands active such as Tata, Mahindra, Hyundai and MG Motors. But Ford will still have some challenges such as excess of existing capacity, skilled workforce, amending assembly lines and setting up the EV supply chain as the PLI mandates 50% domestic value addition. In the absence of any clear plans, it remains a case of ‘wait and see’ on Ford’s next move in India.”

Credits: Bakar Sadik Agwan, Senior Automotive Consulting Analyst at GlobalData