scorecardresearch
Here's why Tesla's global challenger Ford doesn't want to make EVs in India

Here's why Tesla's global challenger Ford doesn't want to make EVs in India

Ford had pitched itself as Tesla's global challenger in EV manufacturing but the American carmaker has now shelved all plans to make EVs in India. What went wrong?

Ford plans to build capacity to produce 2 million EVs globally by 2026. Ford plans to build capacity to produce 2 million EVs globally by 2026.

Earlier this year, US carmaker Ford Motor Co. had said that it was considering making electric vehicles (EVs) in India for exports and even for domestic sales. According to reports, it has now shelved plans to do that. Ford was among 20 carmakers under the Champion OEM Incentive Scheme, a part of the PLI (production-linked incentive) scheme with a budgetary outlay of nearly Rs 26,000 crore. The company, which was keen on making EVs from one of its plants, either in Gujarat or in Chennai, has withdrawn its application from the PLI scheme for export of electric vehicles.

According to a Ford India spokesperson, the company has decided to no longer pursue EV manufacturing for exports from any of the Indian plants. "We remain grateful to the Government for approving our proposal under the Production-Linked Incentives and for being supportive while we continued our exploration," the spokesperson said.

Globally, Ford has very different EV plans. The company plans to build capacity to produce 2 million EVs globally by 2026. Company CEO Jim Farley has said that it has set its sights on topping Tesla in the race to become the global leader in EVs. 

"We plan to challenge Tesla and all comers to become the top EV maker in the world," Farley said during a production launch event for the electric F-150 Lightning pickup. In Europe, Ford plans to launch seven new EVs, including an electric version of the Puma small crossover, its best-selling car in the region. The company said it will come up with three new passenger cars and four electric vans for the Europe region by 2024.
 
"India is currently leading in its market share for electric 2W and 3W, the 4W market is yet to catch steam on its underlying potential. Consumer sentiment is transforming gradually as masses are sensitised about the perks e-mobility solutions offer. Leading players in the 4- wheeler segment are waiting for the right opportunity to enter the market and not at the nascent stage," observed Sohinder Gill, President, SMEV (Society of Manufacturers of Electric Vehicles).

He added that geopolitical instability is a potential contributor to automobile players pausing their EV operations in India --- the ongoing war in Ukraine and China's lockdown owing to 4th wave of COVID-19 that has engulfed its key cities and has amplified input costs for automakers, making the idea of fresh investments in electric division a slippery slope. 

"Another reason could be the price factor and demand-supply dynamics; majority of the demand for 4WEV in India is being met by local domestic players by offering value for money products compared to foreign ones which are relatively costly. However, taking into account the steadfast development in EV space, both from a logistics and policy standpoint, there will be accelerated incoming of global players into the India market in the coming years as we position ourselves as the leading EV hub," he added.

"Over the last two decades the company has been struggling to generate profits in India. It has failed to make a mark in India's passenger car market. Also, with respect to the proposed EV facility which they wanted to go ahead with they might have felt that the business case didn't work out in their favour. The retooling and repurposing of their existing plant for manufacturing EVs will entail further costs. Along with that due to Russia-Ukraine crisis and China's lockdown have led to semiconductor chip shortages and price hike in key raw materials. Also the commodity prices haven't stabilised fully. That's also impacting the production. These are some of the key reasons behind the announcement," Darshan Gangar, Research Associate, Axis Securities, said.

Last year, the maker of EcoSport SUV exited the Indian market after accumulating losses of more than $2 billion over the last decade -following the likes of Peugeot, General Motors, Harley-Davidson, etc. The company will soon be scouting for a new buyer for its Maraimalainagar plant in Chennai. Speculations were doing the rounds that Hyundai and Ola are the two of the interested names. 

Also read: Ford to stop production next week at Flat Rock plant amid chips shortage

Also read: Ford sells 8 million shares of EV maker Rivian for $214 million