Economy, Auto

Ford Axes Small Car India, China Plans

Ford Axes Small Car India, China PlansFord Axes Small Car India, China Plans

Ford Motors has shelved plans to produce a new compact car designed mainly for emerging markets like India and China, industry sources said, reflecting disappointing sales of mainstream models in the world’s fastest growing car markets.

India and China were expected to be the main manufacturing hubs for the new B500 range, slated to begin production in 2018 and to include a premium sedan, hatchback and sport utility vehicle, two sources with direct knowledge of Ford’s plans told Reuters.

The automaker had also planned to build its new models in Brazil, Russia and Thailand, one of the sources said.

Ford’s decision, communicated to its suppliers in July, follows a similar move by General Motors to postpone the launch in India of a new $5 billion family of compact vehicles.

Ford’s program is on ice because of muted demand for some of its small and mid-sized hatchbacks and sedans in India and China, where SUVs and “crossovers” combining the hatchback and SUV have proved increasingly popular.

The cost of upgrading plants to produce the new cars would also be prohibitively high, the sources following Ford said.

All of the sources declined to be named, as they have not been cleared to discuss the plans publicly.

Ford declined to comment on the development.

“We are constantly evaluating opportunities to better meet the needs of consumers and do not comment on speculation about future product programs,” a Ford spokesman said in a statement.

 Shift to SUVs

That said, Ford has invested over $2 billion in India and plans to spend more to set up a global engineering center in the southern Indian city of Chennai that will help tweak products for the local market and more swiftly adapt to changing consumer trends.

The carmaker is also ramping up exports, including to Europe, to maximize usage of its two plants in India.

“India is a key market for us in Asia Pacific,” said the spokesman, adding that the carmaker is committed to introducing new products and technologies in the South Asian nation.

But instead of the more ambitious plan for the key markets of India and China, Ford will focus on updating existing models and produce more SUVs and crossovers, moving away from sedans and hatchbacks, according to two separate US sources with knowledge of the company’s plans.

 Setback for “Make in India”

The retreat by Ford and GM is a setback for India’s “Make in India” push to become a global manufacturing powerhouse, including in the auto sector.

Retooling the assembly line to build the B500 vehicles at Ford’s plant in Gujarat, Prime Minister Narendra Modi’s home state, would have meant an investment of more than $100 million and created manufacturing jobs as it cranked out more cars.

Ford and GM have struggled to crack emerging markets in Asia where competition from Japanese, South Korean and now Chinese automakers is fierce.

GM shut production in Indonesia owing to its modest market share and Ford also plans to close its operations in the Southeast Asian nation, as well as in Japan and Australia.

Dearborn-based Ford is now looking at each country in the region in terms of long-term profitability opportunities, said another source familiar with Ford’s plans, while noting India remains a tough place to make money.

India’s passenger car market, where sales rose 7% last fiscal year to 2.8 million units, is dominated by Maruti Suzuki and Hyundai Motor Co. with their extensive lineup of cars and vast dealer networks.

Maruti and Hyundai control two-thirds of the market whereas Ford’s share in India, set to be the world’s third-largest car market by 2020, has stagnated at about 3%.