Ford exiting India, lock-stock-barrel means nothing to the stock market simply because it is not a listed company. But if we look at this exit without wearing the market glasses, what do we see?
We see a messy exit, some 400-odd employees left in a lurch, dealers in big trouble, Ford car owners bewildered and more importantly, on the ‘bigger picture’ front, we see another exit from India by a global company.
And that’s what we need to find out – why are global car majors exiting India? That too at a time when the Govt is bending backwards to climb up higher on the global Ease of Doing Business ladder and pumping money into the “Make in India” movement. So, on one hand we have the Govt doing everything it can to welcome bug global names to make in India, even tweaking rules to get Tesla and then on the other, we have such exits.
Ford is not the first. Four years ago, General Motors too quit India. And prior to that we have had Fiat, United Motors or UM of USA and what really shocked everyone was the exit of Harley Davidson in Sept’20. The closure of Premier is way back in history. Just an observation – more American companies have quit than others – has it got to do with the Free Trade Agreement (FTA) which India did not sign-on to? Many of these companies set up shop in India hoping to use it as a base to export to Europe. That did not happen.
FTA might be one of the reasons but the truth is that these companies simply could give what Indians wanted – a low-cost car which is fuel efficient. Maruti gives us exactly this and that is why it remains the market leader despite the entry and exit of so many international auto majors. Cost of the car and fuel efficiency – if car makers crack this two-pronged formula, they have made it!
Hyundai is probably the only other car maker who is managing to give Maruti a tough competition while Kia too is making its presence felt. It is no longer true that Indian’s are buying small cars; there is now a much bigger demand for cars in the Rs.6-7 lakh price range. And these American companies probably quit at a time when their run was actually about to begin.
What could also be equally true is that these car makers who quit India simply did not know what Indians want. They did not introduce models which were India-friendly or those which we adapted to India’s liking. Yes, they were all making losses perpetually and they finally decided to cut their losses. Maybe their strategies were completely way off the mark and the launch timings of models - they needed to look at Maruti and learn.
It would be wrong to cry wolf and say that global car companies are quitting India; that’s too drastic. There are others who continue to remain on firm roads – Honda, Hyundai, Toyota, Kia, Skoda, BMW, Merc. Toyota did announce earlier that it was quitting but then clarified that it was staying put and was infact expanding its capacity. VW too wanted to quit but it did the smart thing by handing over the lead to Skoda. VW’s high cost structure never really allowed it to have a price advantage in a price-sensitive market like India, so Skoda's low-cost structure is what now remains in India.
India’s demographic advantage is too huge to give it a miss but at the same time, our need for only low-cost cars means we might miss out on a lot of new cars from world car leaders. For that to happen, making the entire population rich will not happen but the Govt needs to relook at its tax structures and policies to ensure that we don’t create duopolies in the auto sector too like the way they have created in telecom.
The Govt does need to introspect and see how it can work on retaining global companies – we are inviting Tesla but we will need to a lot more to ensure it stays. A salesman will do and say so many things till you buy the product but once you have bought it, the after-sales service is pathetic – that’s how the Govt seems to be working with the ‘Make in India’ model.
Ford has veered off the Indian roads – hope we keep the others on track.