Ford’s dream in India turns into a nightmare

NEW DELHI — When Ford Motor Co. built its first plant in India in the mid-1990s, American automakers thought they were buying for the next China boom.

The economy was liberalized in 1991, the government was welcoming of investors, and the middle class was expected to fuel a frenzy of consumption. Forecasters said an increase in disposable income would help foreign automakers gain a market share of up to 10 percent.

It never happened.

Last week, Ford received a loss of $ 2 billion Stop making cars in India, after General Motors and Harley-Davidson closed factories in the country.

Of the remaining foreigners, both Japan’s Nissan Motor Co. and even Germany’s Volkswagen AG have less than 1 percent of the car market that was once projected to be the third largest by 2020, after China and the United States, with annual sales of 5 million units.

Instead, sales froze at around 3 million vehicles. The growth rate has slowed to 3.6% in the past decade from 12% a decade ago.

Ford’s decline marks the end of the Indian dream of American automakers. It also comes after its exit from Brazil announced in January, reflecting an industry pivot from emerging markets to what is now widely seen as a successful or failed investment in electric vehicles.

Analysts and executives said foreigners have misjudged India’s potential and underestimated the complexities of operating in a vast country that rewards domestic purchases.

Many fail to adapt to a preference for small, cheap, fuel-efficient cars that can hit uneven roads without the need for expensive repairs. In India, 95 percent of cars are under $20,000.

Lower taxes on small cars have also made it difficult for larger automakers for Western markets to compete with small car specialists such as Japan’s Suzuki Motors – the controlling shareholder of Maruti Suzuki India Ltd., India’s largest automaker in terms of sales.

Of the foreign automakers that have single-handedly invested in India over the past 25 years, analysts said South Korea’s Hyundai Motor is the only one that stands out as a success, mainly due to its broad portfolio of small cars and its understanding of what Indian buyers want.

said Ravi Bhatia, India Head of JATO Dynamics, a provider of market data for the auto industry.

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