In Chennai, located in southern India, a previously shuttered factory is quietly coming back to life. Three years ago, Ford announced the closure of its two factories in India due to poor market performance. Now, the company is rethinking that decision.
In early September, Ford officially announced the resumption of operations at its Chennai plant, with plans to transform it into an electric vehicle (EV) export manufacturing hub. This move not only highlights Ford’s strategic thinking in its global transition towards electrification but also underscores the importance of the Indian market and the potential opportunities emerging in its nascent EV sector.
Ford’s decision to restart operations is closely tied to the Indian government’s policy support. In September, the government unveiled an EV promotion subsidy program worth INR 109 billion, covering electric buses, trucks, ambulances, and more, with the aim of fostering domestic EV growth. In addition to financial incentives, India is accelerating the development of charging infrastructure and the testing of new technologies, positioning itself as a global automotive manufacturing hub.
For Ford, this is not just a response to Indian policies but also a strategic part of diversifying its global supply chain. As the landscape of global auto manufacturing shifts, many multinational companies are seeking alternative production bases to mitigate risks associated with the Chinese market. India, with its advantages in labor costs and policy support, presents a potential alternative, and Ford’s re-entry reflects this consideration.
However, despite India's improving policy environment, Ford’s return comes with significant challenges. First, India’s EV market is still in its infancy, with electric vehicles making up only 1.3% of total sales in 2023. High upfront costs and a lack of sufficient charging infrastructure remain major barriers to widespread EV adoption. Ford will face the challenge of how to break through in such an immature market.
Additionally, Ford’s decision is made under the pressure of financial struggles. Ford’s sales in the Chinese market have been steadily declining. In 2017, the company sold 1.19 million vehicles in China, but by 2023, this figure had plummeted to 467,000, resulting in cumulative losses exceeding $1 billion. Against this backdrop, it remains uncertain whether the Indian market can provide Ford with a new growth driver.
Moreover, competition in the Indian market is becoming increasingly fierce. Suzuki continues to dominate, and Chinese automakers face even greater challenges in India. This means Ford will not only have to contend with strong local competitors but also navigate a complex cultural and regulatory environment to find its breakthrough.