Is the PLI scheme bringing Ford back to India, but as an EV maker this time?

• Last year, Ford Motor decided to pull the plug on local manufacturing in India after operating for 25 years.
• This week, the US automaker said it is considering returning but to produce electric vehicles instead, for export, and possibly for sale in the domestic market.
• Just last week, the company’s proposal to seek incentives under India’s US$3.5 billion PLI scheme for clean-fuel vehicles was approved.

After deciding to pull its plug on the Indian market last year, Ford Motor Co. recently announced that it might come back to India, this time to manufacture electric vehicles (EVs) instead. The announcement came right after the US’ automaker’s proposal to seek incentives under India’s new US$3.5 billion production-linked incentive (PLI) scheme was approved on the same day.

To recall, last September, Ford India decided to wind down operations at its plant in Sanand in Gujarat by the fourth quarter (Q4) of 2021 and vehicle and engine manufacturing in its Chennai plant by 2022. The automaker attributed its departure to mainly weak demand. 

Ford India head Anurag Mehrotra said, “Despite (our) efforts, we have not been able to find a sustainable path forward to long-term profitability.” Ford even said it would “take a hit of about US$2 billion as it does not see a path to profitability in India.” 

The company, which has once tasted success with models like Ikon, Figo and EcoSport, ended up with a passenger vehicles market share of less than 2%. Ford however, wasn’t the only automaker that exited India. In fact, they were the fifth automaker which has announced to stop manufacturing in the country after MAN Trucks, General Motors, Harley Davidson and UM Motorcycles.

So why is Ford India taking a U-turn on its stance?

Call it a U-turn or turn over a new leaf, but according to Ford’s statement on Friday, the company said it was “exploring the possibility of using a plant in India as an export base for EV manufacturing.” Reuters even reported that the company, when asked, said it may consider selling EVs in India as well.

“There have been no specific discussions on this right now, but it is not out of the realm of future consideration,” Reuters reported, quoting a Ford India spokesperson. To be fair, Ford has been eyeing for a “global electric vehicle revolution”. The automaker has previously said it plans to invest US$30 billion in EVs and batteries through 2030.

To top it off, the Indian government recently announced that 20 companies–one of which is Ford–have been selected to receive incentives under the PLI scheme for the Indian automotive sector. The scheme is a cornerstone of the Narendra Modi government’s agenda to cut oil imports and reduce pollution by giving benefits of up to 18% of new investments made by companies to manufacture electric and hydrogen fuel-powered vehicles. 

“We thank the government of India for approving Ford’s proposal under the PLI scheme for the automobile sector. As Ford leads customers through the global electric-vehicle revolution, we’re exploring the possibility of using a plant in India as an export base for EV manufacturing, ” Ford India’s Head of Communications and CSR, Kapil Sharm said.

That said, since Ford wants 40% of its vehicles to be electric by 2030 globally, India could help them achieve this by becoming an export hub for the company. “The project is in the exploration stage and with discussions ongoing, we don’t have anything additional to share at this time,” Sharma concluded.

 

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