Why did Ford, General Motors, and Harley-Davidson Bid Adieu to India?

“Art is making something out of nothing, and selling it.” However, if, despite spending millions, no one is buying your products, the only reasonable course of action is to change direction and reconsider your strategy. 

India, the world’s fifth-largest car market, has a lot of potentials, but it’s not simple to break into. Other manufacturers have learned the hard way and have modified their strategy and product ranges to remain competitive and profitable. 

This is something I can say about the following automakers, who, despite recognising India as a booming industry, were unable to make an impact and hence chose to exit while they could. Let’s take a look at the top 5 auto businesses that have stopped doing business in India in the last five years:

Ford (End of Operation in India – September 2021): 

Ford, a well-known automobile manufacturer in the United States, has stated that its two manufacturing facilities in Gujarat and Tamil Nadu will cease operations.

Chevrolet, a brand of General Motors, left the country in 2017, while Ford, another American automaker, confirmed the closure of two of its largest factories in 2018.

Ford has been losing $2 billion in India over the last decade, and demand for its vehicles has decreased, forcing the corporation to make this decision. The carmaker has been manufacturing automobiles in India for 25 years but has struggled to find success due to increased competition. 

Harley Davidson (End of Operation in India – September 2020): 

The American behemoth was forced to retire due to poor sales. To keep the costs of its motorcycles down, the famed cruiser bike maker opened its first manufacturing outside of America in Bawal, Haryana, in 2011.

However, the constructed bike was more expensive than its competitors due to high taxes. While the tax was a crucial factor, COVID assured that Harley’s choice to leave the nation was hastened. 

Fiat (End of Operation in India – March 2019): 

The Italian automaker was one of India’s oldest automobile manufacturers. It had a positive reception from purchasers in this region of the world in the late 1990s, but as competition increased, Fiat lost the plot and sales began to decline. In 1997, Fiat and Tata Motors formed a joint venture in India.

Although its cars were a delight for enthusiasts, the fuel efficiency and design failed to please the general public (especially when Hyundai brought new products). It stopped producing in January 2019 and shut down completely in March of last year. 

General Motors (End of Operation in India – December 2017): 

With the Opel brand, General Motors entered India in 1996 and had some success. In 2003, it tried again with the Chevrolet brand. For vehicle fans in the country, the American behemoth’s plan to shut down on December 31, 2017, came as a complete shock.

Some of GM’s automobiles have managed to strike a chord with enthusiasts, if not with sales, over the last two decades of its India operations.

UM Motorcycles (End of Operation in India – October 2019): 

United Motors of America began operations in India in cooperation with Lohia Auto. The company has received a lot of criticism from customers and professionals alike due to low-quality parts. 

It hoped to compete in India with brands like Royal Enfield, but the use of low-cost Chinese parts derailed its plans and cost consumers money.

FADA (Federation of Automobile Dealers Association) is pursuing legal action against it after it abruptly ceased operations in India, leaving its dealers in the lurch. 

Why Major Automobile Manufacturers Have Departed from India: 

  • The Indian automobile market is no longer what it once promised to be, with the country’s global ranking anticipated to drop from fourth to third, based on vehicle numbers rather than value.

Instead, because the market flattened off and then fell for two years before regaining this fiscal year, it has slid to fifth place (behind Germany). This is part of a wider tale about India’s consumer markets losing steam. 

  • Price: India is a market for low-cost, low-maintenance vehicles. Because the majority of the globe prefers larger cars, the global majors do not have models that fit into that framework.

Only Maruti and Hyundai have successful entry-level cars (they control two-thirds of the market). No car from Ford, Toyota, VW, or Honda can compete with Maruti’s best-selling Alto, which has dominated the entry-level market with a price tag of Rs 3-lakh. Most global giants are unable to produce a car at that price. 

  • Domestic success is required for export success. Ford built a second large-scale vehicle plant in Gujarat (in addition to one in Tamil Nadu) in anticipation of a free-trade agreement (FTA) that would allow Indian cars to enter the European market.

The FTA has not been implemented. In India, the company has only had one somewhat successful model, thus it hasn’t used three-quarters of its production capacity. The decision to leave became unavoidable.

  • Markets for automobiles are clingy. No one has been able to threaten Maruti’s early-bird market dominance in India. The early local vehicle companies dominate in France, Germany, Italy, Japan, and South Korea.
  • Ownership of one category (such as tiny cars) does not guarantee success in other segments; consider Maruti’s Ciaz sedan’s failure to compete against Honda’s City. It’s a tough world out there, and success must be won in every industry and segment.

Hundreds of Micro, Small and Medium-Scale Industries (MSMEs) thrived by making supplementary products for Ford, thus this does not bode well for the ambitious ‘Make in India’ effort.

According to industry insiders, Ford’s closure will certainly affect 4,000 MSMEs. There may also be indirect job losses, as countless micro industries are wholly reliant on Ford’s orders. There are approximately 500 small-scale industries that supply three or four companies, resulting in a loss of up to 50% of orders as a result of Ford’s decision.

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