Energizing India News, 16th Feb ’22

Under the government’s PLI incentive program, Ford might be able to manufacture EVs at one of its Indian plants. 

Only six months after Ford India shut down local manufacturing, we now have word that the American conglomerate may be able to resume production here, having been granted a license under the government’s PLI scheme. “We applaud the Government of India for approving Ford’s proposal under the PLI scheme for the vehicle sector,” said Kapil Sharma, director, Communications at Ford India, in a press release. “As Ford leads customers through the global electric car revolution, we’re looking into the prospect of employing an Indian factory as an EV production export base.” 

Aside from the announcement that Ford may recommence automobile production in India, and that it will be for export, there are several other intriguing possibilities that have yet to be revealed, such as which models will be made, at which plant, and whether they will be sold to Indian buyers, and if so, when? 

Which plant would Ford India choose for its electric vehicles? 

For the time being, Ford is remaining tight-lipped and has no further facts to share; the firm must now pick which of its two operations to retain. Both plants, which previously only manufactured internal combustion engine (ICE) models, would require retooling and other significant improvements to accommodate EV production. As a result, the decision would be based on which of the two would be best suited to the necessary re-tooling. 

However, another significant consideration is which factory has the greatest potential for sale, as Ford has declared that it cannot maintain the functioning of both the plants and is trying to sell one of them. As a result, the company has a lot to figure out on this front. 

What things would be manufactured here must also be determined. Ford would not want to move the manufacturing of an existing car from an established line, and moreover, the firm has a very robust EV game plan that includes many new EVs, so it will very certainly be a brand-new model. The business just announced a significant $30 billion global commitment to develop all-new hybrid and fully electric automobiles. The India plant, likely, would be used to produce lower-cost EVs in order to capitalize on India’s low-cost structure. 

If any of this comes to fruition, it won’t be anytime soon, considering the massive re-tooling required for the facility and the fact that this will most likely be an entirely new model that has yet to be developed. 

Are Ford India’s EVs only for export? 

According to the business statement, Ford may turn India into an export-only production facility. The government PLI system permits enterprises to make items in the country even if they are not sold there, if they achieve localization targets, year-on-year growth targets, and a few other conditions. 

However, with an active dealer network and Ford continuing to serve consumers with a five-year price freeze on spare parts and consumables, as well as stating that it will keep over 90% of its service network, it would make logical sense to sell these made-in-India EVs domestically. Furthermore, the PLI plan requires a high level of localization, making these lower-segment EVs particularly viable in the Indian market. 

Will Ford India be all-electric? 

“There have been no specific discussions on this right now as Ford also plans to serve customers in India with must-have, iconic automobiles, like the Mustang coupe,” Sharma said, adding that the firm has not yet envisioned that plan. 

As a result, we may soon see a mix of locally manufactured Ford electric vehicles and imported higher-end Fords. With this move, it is evident that Ford has not given up on India and wishes to keep its options open in the Indian market. 

Car aficionados and Ford owners across the country were shocked when the American automaker announced its exit from the retail market last year. Ford India had a market share of less than 2% at the time of production and retail discontinuation. Ford made a strategic business transition in September 2021, after recording losses of more than USD 2 billion and no profitability in Indian retail operations insight. However, the Blue Oval is reconsidering its choice and re-entering. In accordance with this, the company would manufacture electric automobiles in India for both export and local consumption. This decision was viewed as a major step for PM Modi’s ‘Make in India’ aspirations. The American automaker, which has two operations in India, is now “exploring the prospect of leveraging an Indian factory as an export base for EV manufacturing.” While the brand’s primary goal is to use one of its Indian operations for exports, it has not ruled out catering to the local market as well. 

Ford fought for more than 20 years to become profitable. Resuming domestic production for export markets should provide the corporation with a foot in the door to re-enter the vehicle market as and when it seems appropriate. India provides a significant cost advantage to carmakers for manufacturing; thus, it remains to be seen whether this strategy of re-entering Indian markets as EV producers would be a viable option or whether it will be abandoned. We’d definitely love to see the Ford Mustang Mach-E speeding around the highways of India.