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Ford plans to reboot a mothballed manufacturing plant in India three years after the US automaker said it would stop building cars in the world’s most populous nation.
The decision by Ford comes as India’s government seeks to attract billions of dollars of investment from international car manufacturers as they diversity supply chains way from China, a geopolitical rival that has dominated sales of electric vehicles.
Ford said on Friday that it had submitted a letter to the government of Tamil Nadu, a business-friendly southern Indian state known as the country’s Detroit, to repurpose its existing factory in the city of Chennai for exports.
Ford had operated in India for almost three decades before announcing it would shut down production in the country in 2021 after struggling to crack its massive domestic market.
Kay Hart, president at Ford’s international markets group, said the carmaker had “explored different options for the Chennai plant” and its reopening was aimed “to underscore our ongoing commitment to India as we intend to leverage the manufacturing expertise available in Tamil Nadu to serve new global markets”.
The announcement came just days after Ford’s senior leadership met in the US with Tamil Nadu’s chief minister MK Stalin. The details of Ford’s plans for the factory were a “work in progress at the moment”, said a person close to the carmaker.
In a bid to create more jobs for its vast and frustrated young workforce, India has sought to attract new investments by offering reduced tariffs on higher-priced imported EVs for companies that commit to making them in the country within three years.
People close to Tesla have said its chief executive Elon Musk remains committed to establishing a plant in India in the long term to build cars for export even after he called off his trip to India earlier this year to prioritise talks in Beijing on bringing full self-driving technology to China.
Other US automakers, including General Motors, have given up on India in recent years as they were unable to price their vehicles low enough to appeal to a large consumer base beyond the country’s wealthy.
Despite growing overall sales in the world’s third-largest car market the US automakers faced serious competition from large domestic companies and foreign joint ventures such as Tata Motors and Maruti Suzuki.
Motorcycle manufacturer Harley-Davidson in 2020 announced it would leave the country, the world’s largest two-wheeler market by sales volume, after battling locally favoured names such as vintage motorbike brand Royal Enfield.
“India is a cost-sensitive market, if you can’t get that right you cannot survive,” said one senior banker in Mumbai. US companies have “struggled because they couldn’t localise”.
Varun Baxi, an auto analyst at brokerage Nirmal Bang, said Ford was probably lured by incentives offered by the Tamil Nadu administration and as well as by the central government under its “Make in India” drive.
“They had assets already in Chennai and, of course, global OEMs are now shifting production to low-cost geographies,” Baxi said. “So both these factors led to Ford coming back.”
Earlier this week India unveiled a new Rs109bn ($1.3bn) two-year subsidy scheme to encourage the adoption of electric trucks and two-to-three wheelers and to expand the country’s limited charging infrastructure.
Ford’s Chennai facility previously produced its EcoSport and Endeavour sport utility vehicles. The company said it now expected to expand employee numbers in India by up to 3,000 workers, adding to the 12,000 staff in its global business operations in Tamil Nadu.
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