Auto giant Ford could restart production of cars in India less than six months after saying it would cease all vehicle manufacturing there.
It’s a spectacular twist — but hardly surprising in today’s hypercompetitive automotive world: Ford Motor (F) – Get Ford Motor Company Report is expected to return to India less than six months after saying it would stop producing cars in the country.
The Indian government has just approved the Dearborn, Mich., company’s request for its proposal under the production-linked incentive scheme for the automobile sector.
The PLI offers considerable advantages of various kinds, including tax rebates, to companies investing in advanced technologies in the auto sector.
In addition to Ford, nearly 20 other companies have had their applications approved.
Following this green light, Ford immediately let it be known that it intended to produce electric vehicles in India, but for export. In particular, it plans to sell these electric vehicles in the U.S., its first market. But the group does not rule out selling these same cars in India.
“As Ford leads customers through the global electric-vehicle revolution, we’re exploring the possibility of using a plant in India as an export base for EV manufacturing,” said Kapil Sharma, a spokesperson, in an emailed statement.
“The project is in the exploration stage and with discussions ongoing, we don’t have anything additional to share at this time.”
Ford for Years Had Been Losing Money in India
Basically, Ford, which had two production sites in the country, has not yet decided which one it will reopen to resume production operations. The group has also not yet decided which electric models it could manufacture in the country.
Ford’s decision is a real surprise. On Sept. 9, the automaker, which said it planned investments of around $30 billion in electrical technologies, was very clear.
“Ford India will cease manufacturing vehicles for sale in India immediately,” the automaker said at the time in a news release.
“Manufacturing of vehicles for export will wind down at Sanand vehicle assembly plant by Q4 2021, and Chennai engine and vehicle assembly plants by Q2 2022; Ford will work closely with employees, unions, dealers and suppliers to care for those directly impacted.”
Ford had explained that the Indian operations had been losing money for 10 years. The automaker therefore wanted to put an end to this sink of losses when it was focusing on clean cars, the development of which is extremely expensive.
“Following accumulated operating losses of more than $2 billion over the past 10 years and [an $800 million] nonoperating write-down of assets in 2019, the restructuring is expected to create a sustainably profitable business in India,” the company explained.
So What Has Changed for Ford India?
One of the first answers could not be clearer: Ford, which wants to have 40% of its car portfolio made up of electric vehicles by 2030, wants to capitalize on a golden opportunity from the government.
The Indian authorities grant significant aid to groups wishing to invest in advanced technologies for the automobile industry. This aid is important given the significant development costs associated with electric cars.
India would thus become a hub for exports, and with the rebates and tax reductions provided for in the PLI, Ford could thus reduce its development costs for electric vehicles.
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