Ford to shut down both its manufacturing plants in India, to sell only imported vehicles

Ford has been struggling for years to make a mark in India`s automotive market. Pic/iStock

US auto major Ford Motor Co will shut its two manufacturing plants in India and will sell only imported vehicles in the country as part of a restructuring exercise, according to people aware of the development.

The company, which invested about USD 2.5 billion at its Chennai (Tamil Nadu) and Sanand (Gujarat) plants, will stop selling vehicles such as the EcoSport, Figo and Aspire which are produced from these plants.

Going ahead, it would only sell imported vehicles like Mustang in the country.

"This is a restructuring decision, where the company will shift to imported vehicles," said a person in the know of the development.

A formal announcement by the company is expected soon.

Ford has been struggling for years to make a mark in India's automotive market.

Ford India has an installed manufacturing capacity of 6,10,000 engines and 4,40,000 vehicles a year. It also exported its models such as Figo, Aspire, and EcoSport to over 70 markets around the world.

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In January this year, Ford Motor Co and Mahindra & Mahindra had decided to scrap their previously announced automotive joint venture and instead chose to continue independent operations in India.

In October 2019, the two companies had announced an agreement under which Mahindra & Mahindra would acquire a majority stake in a wholly-owned arm of Ford Motor Co (FMC) that will take over the automotive business of the US auto major in India.

The new entity was to develop the market and distribute Ford brand vehicles in India while also selling both - Mahindra and Ford - cars in the high-growth emerging markets.

As part of the agreement, M&M was to acquire 51 per cent stake in a wholly-owned arm of the US auto major -- Ardour Automotive Private Ltd, presently a wholly-owned subsidiary of Ford Motor Company Inc, USA for around Rs 657 crore. The balance 49 per cent equity shareholding in Ardour was to be held by FMC and/or any of its affiliates.

The new venture was also envisaged to acquire the automotive business of Ford India Pvt Ltd (FIPL), a wholly-owned subsidiary of FMC, that has been engaged in the automotive business in India since 1995.

The automotive business which was to be acquired included vehicle manufacturing plants of Ford India at Chennai and Sanand but excluded the separate powertrain facility in Sanand, which is essentially used for FMC's global markets, and the powertrain division of FIPL also did not form part of the deal.

Ford is the second American auto major after General Motors to shut plants in India.

In 2017 General Motors announced that it would stop selling vehicles in India as there was no turnaround in its fortunes here even after struggling for over two decades to make a mark. The company sold its Halol plant in Gujarat to MG Motors, while it continued to run its Talegaon plant in Maharashtra for exports but ceased production there last December.

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