The reason behind exits of Automobile companies from India


Recently Ford Motors, exited India citing a whopping $2 billion losses in 10 years. Four Year's Ago General Motors (GM) exited India due to it's exit in non-profitable operations in regions including India, Russia & Western Europe. More recently Harley Davidson left India to focus on Select markets such as North America, Europe & some parts of Asia. This exits of Automobile sector giants brings us to a important question that Why are these MNCs exiting India? Well Let's see that in today's article

Did you know Ford had already exited Indian Market in 1953 due to several import restrictions, it re-entered India in 1996 with a Joint Venture (JV) with Mahindra and Mahindra, and a successful model - The Ford escort, which was also commended by Wipro chairman Azim Premji. In these 25 years, the Ford India saw the failure of Mondeo and Fusion, Also in 2019 it called of the JV which just amplified the problems for the car manufacturer.

In fact due to presence of Japanese and Korean manufacturers in India, their Low-cost models in a Cost-conscious Indian Market had made their presence weak. Maruti Suzuki with a lion's share of 48%, Hyundai with 17% share are some examples of what Indian consumers prefer. Adding to this the woes of pandemic which led to closure of Retail outlets across India; rising fuel costs; shortage of semi-conductor made the matters worse.

What? How this will impact Indian economy?, well firstly let's face a fact, employment rate in India is at record low, Ford closing Gujarat's Sanand vehicle assembly and engine plant by fourth quarter of 2021 and it's Chennai plant by 2022 will witness loss of 4,000 jobs. This exits will discourage MNCs to invest in India citing fear of losses in future. India which was to go up 3rd from 4th in global ranking in Automobile has slipped to 5th place overtaken by Germany.

This wraps up the reason behind exits of Automobile companies from India.

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Disclaimer - Above information is to spread financial literacy. We are not SEBI registered financial advisor, kindly consult your financial advisor before taking any investment decision.
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