 "Fresh investments in motown may cross $4 bn; auto firms in talks with govt")
A day after American carmaker Ford announced it was shutting manufacturing plants in India, government officials said the country’s automotive industry was still a preferred destination for investments. The industry is expected to attract investments worth $4.4 billion from a clutch of deals that are in various stages of making, a senior official said on Friday.
Over the last year-and-a-half, as many as 13 global and domestic automobile companies including Skoda-Auto-Volkswagen, Yazaki Corporation, Ola Electric, Bahwan International Group, Kinetic Green Energy, Tesla, among others, have evinced interest in setting up business in India with an indicative investment of $4.4 billion, according to official data reviewed by Business Standard.
The 13 companies are in various stages of investment. Five of them--Bahwan International Group, Stanley Black and Decker, Kinetic Green Energy, Tesla and Nidec--are l evaluating their business plan in India. The remaining are in different phases, including land acquisition, commencement of construction, production, as well as signing of pacts.
Government estimates show that more than $35-billion investments have come into the country’s automobile sector during the last six years.
“Ford’s decision to end manufacturing in India is due to competition from Japanese and Korean car makers. Ford’s exit is related to possible operational reasons and does not in any way reflect the story of the Indian automobile sector or business environment in India,” another government official said, adding that the outbreak of the pandemic could have also impacted sales volumes.
On Thursday, Ford India said that it would stop making vehicles in India but retain the engine-making and technology services business. This move is a part of restructuring the company’s operation in India. Approximately 4,000 employees are expected to be affected by this. A top company official had said the move was prompted by mounting losses and a slowdown in India’s passenger vehicle market.
The carmaker’s exit stirred up a debate on whether the government could have rescued the company, considering that the auto sector contributes 49 per cent to the manufacturing GDP and employs over 5 million.
“The company hasn’t approached the government for any support or help. However, the government is always open to considering views, in case any company needs help,” one of the government officials cited above said.
“Entry and exits in any sector is a sign of the market maturing. The latest decision by Ford is a part of its own business strategy,” he said.
The official dismissed criticism that the move could be a blow to the government’s Make-in-India initiative.
Ford’s strategy
Ford's restructuring in India is in line with the global strategy it has embarked on, to exit non-profitable and under-performing markets. As part of this, in January 2021, it exited Brazil.
The decision came after all the efforts to turnaround its operations failed. The latest being the joint venture with Mahindra and Mahindra. The two companies called off the JV on December 31 due to the challenges linked to the pandemic.
“While the growth rates in India's PV market have indeed tapered off to low single digits in the past decade from 10 per cent in the previous decade, the fundamentals remain strong,” said an analyst at a consulting firm. A low per car penetration --- 32 per thousand, a young population and the need for mobility--would drive sales in the years ahead, he said.
Ford, according to him, wouldn't have taken this call if its market share was 15 per cent. A sub optimal capacity utilisation and a highly competitive market guided the decision, the analyst pointed out. "With the disruption in technology and environmental regulations sweeping the auto industry globally, expect more global companies that are marginal in this market and elsewhere to quit in future," he said.
Over the last year-and-a-half, as many as 13 global and domestic automobile companies including Skoda-Auto-Volkswagen, Yazaki Corporation, Ola Electric, Bahwan International Group, Kinetic Green Energy, Tesla, among others, have evinced interest in setting up business in India with an indicative investment of $4.4 billion, according to official data reviewed by Business Standard.
The 13 companies are in various stages of investment. Five of them--Bahwan International Group, Stanley Black and Decker, Kinetic Green Energy, Tesla and Nidec--are l evaluating their business plan in India. The remaining are in different phases, including land acquisition, commencement of construction, production, as well as signing of pacts.
Government estimates show that more than $35-billion investments have come into the country’s automobile sector during the last six years.
“Ford’s decision to end manufacturing in India is due to competition from Japanese and Korean car makers. Ford’s exit is related to possible operational reasons and does not in any way reflect the story of the Indian automobile sector or business environment in India,” another government official said, adding that the outbreak of the pandemic could have also impacted sales volumes.
On Thursday, Ford India said that it would stop making vehicles in India but retain the engine-making and technology services business. This move is a part of restructuring the company’s operation in India. Approximately 4,000 employees are expected to be affected by this. A top company official had said the move was prompted by mounting losses and a slowdown in India’s passenger vehicle market.
The carmaker’s exit stirred up a debate on whether the government could have rescued the company, considering that the auto sector contributes 49 per cent to the manufacturing GDP and employs over 5 million.
“The company hasn’t approached the government for any support or help. However, the government is always open to considering views, in case any company needs help,” one of the government officials cited above said.
“Entry and exits in any sector is a sign of the market maturing. The latest decision by Ford is a part of its own business strategy,” he said.
The official dismissed criticism that the move could be a blow to the government’s Make-in-India initiative.
Ford’s strategy
Ford's restructuring in India is in line with the global strategy it has embarked on, to exit non-profitable and under-performing markets. As part of this, in January 2021, it exited Brazil.
The decision came after all the efforts to turnaround its operations failed. The latest being the joint venture with Mahindra and Mahindra. The two companies called off the JV on December 31 due to the challenges linked to the pandemic.
“While the growth rates in India's PV market have indeed tapered off to low single digits in the past decade from 10 per cent in the previous decade, the fundamentals remain strong,” said an analyst at a consulting firm. A low per car penetration --- 32 per thousand, a young population and the need for mobility--would drive sales in the years ahead, he said.
Ford, according to him, wouldn't have taken this call if its market share was 15 per cent. A sub optimal capacity utilisation and a highly competitive market guided the decision, the analyst pointed out. "With the disruption in technology and environmental regulations sweeping the auto industry globally, expect more global companies that are marginal in this market and elsewhere to quit in future," he said.
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