The company exited India in 2021 but is now preparing for the possibility of new investments and production aimed at both local sales and exports, reported The Times of India quoting sources.
“A report on the feasibility of re-entering India and the growth potential of the market has been prepared. This will now be considered by the global team at Ford’s headquarters. We expect a positive response,” a source told ToI.
Having previously invested over $2 billion in India, Ford experienced success with models like the EcoSport mini-SUV and the Figo small car. The company now believes India as a crucial market for future growth as Western markets stagnate.
With China’s and Europe’s markets not being as significant, India becomes a focus for growth.
“Feeling is that it is not right to stay out of India, especially as the brand is still well-known to potential buyers,” a source told ToI.The company’s re-entry plans, if approved, will involve a comprehensive overhaul of the Chennai plant. Legal preparations and updates to existing machinery will be required to resume production. The sources expect a positive response to the proposal from Ford’s global team.
Ford’s India re-entry plan
An early indication of Ford’s reconsideration of its exit from India surfaced late last year when the company decided to backtrack on a deal to sell its Chennai plant to Sajjan Jindal’s JSW. It had already sold its plant in Gujarat to Tata Motors. A spokesperson for Ford stated, “We continue to explore suitable alternatives for the Chennai plant and have no further information to share.”
“If a re-entry into India is approved, Ford may still take around one year to start production at the Chennai factory. There will be a lot of work that needs to be done, both on the legal side as well as making the plant and machinery fit for making cars again,” a source revealed to ToI.
Ford’s history in India dates back to 1995. Despite three decades in the country and partnerships with Mahindra & Mahindra, the company struggled to establish a stable business. The joint ventures with Mahindra & Mahindra, initiated in the late 1990s and then again around 2019, did not yield the expected results.
Earlier also reports indicated that Ford is contemplating a re-entry into the Indian market with a focus on electric vehicles. Meanwhile, India also unveiled a new EV policy in March, aimed at attracting major automotive players to invest in and develop electric mobility solutions in the country.
India’s new EV policy
India’s new electric vehicle (EV) policy aims to promote the country as a manufacturing hub for EVs and attract investments from global manufacturers. Companies must invest a minimum of Rs 4,150 crore (USD 500 million) in manufacturing facilities for electric four-wheelers (e-4W), which must be operational within three years and achieve specific domestic value addition (DVA) benchmarks.
Under the policy, approved manufacturers must provide a bank guarantee. They must reach 25 percent DVA within the three-year period, increasing to 50 percent within five years.
The policy allows importing completely built units (CBUs) of e-4Ws at a reduced customs duty of 15 percent. However, this privilege comes with conditions. The maximum number of e-4Ws that can be imported at this reduced duty rate is capped at 8,000 per year. Additionally, the carryover of unutilised annual import limits is permitted.
The policy outlines: “The manufacturing facilities will have to be made operational within a period of 3 years from the date of the issuance of the approval letter by the Ministry of Heavy Industries and achieve a minimum DVA (domestic value addition) of 25 per cent within the same period, and increase it to 50 per cent in five years.”
Moreover, companies must comply with the set investment and operational timelines to qualify for the reduced duty benefit. The way is paved for reputed global manufacturers to consider India as their next production destination under these new guidelines.
