As Ford Plans Re-entry into India, What Went Wrong Last Time?

Over six months after announcing its intention to reopen its mothballed plant in Chennai, Ford Motor Company appears to have a plan to restart production at the facility. However, it does not include car manufacturing. 

The US automaker plans to use the factory in the southern Indian state of Tamil Nadu to manufacture and export engines and its components, The Economic Times (ET) reported. 

The facility at Maraimalai Nagar, near Chennai, has been non-operational since mid-2022 after the company announced in 2021 that it would cease all manufacturing operations in India. 

Ford previously operated two factories in the country—one in Tamil Nadu and another in Sanand, Gujarat. Most of the Gujarat facility has been sold to Tata Motors, while the remaining part is used for component exports. 

According to the ET report, the American automaker has a similar strategy for the Chennai facility, as it has closed all dealerships in India while retaining only service centres. 

A spokesperson for Ford Motors India told Outlook Business that the company is "committed to utilising the manufacturing capabilities in Chennai to serve global markets and remains thankful to the Government of Tamil Nadu for their continued support as we advance our plans." 

"Further details regarding the type of manufacturing, timelines, and other specifics will be shared in due course. We have nothing additional to share at this time," he added. 

Ford Lost Over $2 Billion In India

Ford entered the Indian market in 1995 through a joint venture with Mahindra & Mahindra, forming Mahindra Ford India Limited (MFIL). It later increased its stake to 72% and renamed the company Ford India Private Limited. 

Until its exit in 2021, the company launched several popular models in India, including the Ford Ikon, Ford Endeavour, Ford Fiesta, and Ford EcoSport. It operated two plants in India, which, according to a Reuters report, had a combined production capacity of about 440,000 cars per year. 

However, in nearly 25 years of operations, the US automaker managed to capture just 2% of the Indian market and utilised only 25% of its existing capacity. 

In 2019, Ford attempted to form another joint venture with Mahindra & Mahindra to manufacture vehicles for emerging markets, but the proposal was scrapped a year later. 

Ford had reported accumulated operating losses of more than $2 billion over ten years in India, with weak demand for its new models. 

"Despite our efforts, we have not been able to find a sustainable path forward to long-term profitability," then-Ford India head Anurag Mehrotra said at the time. 

M.K. Stalin's Push, Ford’s Comeback

Tamil Nadu Chief Minister M.K. Stalin pushed for Ford to restart operations at the facility, which employs over 12,000 people. 

"Had a very engaging discussion with the team from Ford Motors. Explored the feasibility of renewing Ford's three-decade partnership with Tamil Nadu to once again 'Make in Tamil Nadu for the world'," Stalin said in a post on X in September 2024. 

Days later, the company issued a statement confirming that it had submitted a Letter of Intent (LOI) to Tamil Nadu government, outlining its plans to utilise the Chennai plant for export manufacturing. 

Kay Hart, President of Ford International Markets Group at the time, stated that the company expected its workforce in Global Business Operations in Tamil Nadu to grow by 2,500-3,000 employees within the next three years. 

"We remain in touch with the Government of Tamil Nadu as we progress through our plans," a Ford spokesperson told Outlook Business. 

In 2021, when Ford announced its exit from India, approximately 4,000 employees were affected. 

At the time, the Federation of Automobile Dealers Associations (FADA) expressed shock over Ford’s decision, criticising its compensation for service-only dealers as "not enough." With 400 outlets and Rs 20 billion ($272 million) invested, the association warned that some dealers faced their biggest financial losses.