Ford Is About to Make a Big Strategic Decision

Ford  (F) – Get Ford Motor Company Report wants to go fast. 

The automotive group does not hide its ambitions to be one of the largest manufacturers of electric vehicles within five years. The company, run by Chief Executive Jim Farley, has promised to build two million EVs annually by 2026.

Four years before this objective, the company has a long way to go. Ford delivered fewer than 7,000 electric vehicles in the U.S. in the first quarter, mainly the Ford Mustang Mach-E SUV. 

But things should change in the second quarter, with the scheduled April 26 start of production and deliveries of the long-awaited F-150 Lightning electric pickup. E-Transit should also make it possible to expand sales. 

But the company has a global strategy, which, of course, goes through Europe. And probably through India.

Talks on Ford’s Chennai, India, Plant Are Ongoing

The provincial government in Tamil Nadu and Ford are in discussions to explore whether the automaker’s factory there can be converted to a plant manufacturing and exporting electric vehicles, the local press reports. Talks are at a very advanced stage and a decision is imminent.

“Keeping the speculations aside, the EV project continues to be in the exploration stage,” Ford India’s spokesperson, Kapil Sharma, told TheStreet in an email statement. “With discussions ongoing, we don’t have anything to share.”

Ford has a plan located in Maraimalai Nagar, Tamil Nadu (western India). It’s well known as the Chennai assembly plant or the Chennai vehicle and engine assembly plant. It is one of the production plants that Ford owned in the country and proposed to close

“Manufacturing of vehicles for export will wind down at the Chennai vehicle assembly plant by Q2 2022,” Kapil Sharma said. 

But there is a good chance that this will change by the end of June because, as TheStreet wrote in February, the Indian government had approved the Dearborn, Mich., company’s request for its proposal under the production-linked incentive scheme for the automobile sector.

The PLI offers considerable advantages of various kinds, including tax rebates, to companies investing in advanced technologies in the auto sector. 

Ford is willing to take advantage of these benefits. The PLI offers 13% to 16% incentives for passenger-EV makers based on the company’s annual sales value. 

In February, Ford told TheStreet it could produce electric vehicles in India, but for export. In particular, it plans to sell these electric vehicles in the U.S., its first market. But the group does not rule out selling the same cars in India.

“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,” Kapil Sharma told TheStreet at the time.

A Growing Electric Vehicle Market

Last September, Ford said it was ending vehicle production in India after racking up a $2 billion loss over 10 years in the market of 1.4 billion people. The automaker had put in place a timetable for closing its two local factories.

Manufacturing of vehicles for export was to wind down at the Sanand vehicle-assembly plant by Q4 2021, the company said, and Chennai engine and vehicle assembly plants by Q2 2022.

“Following accumulated operating losses of more than $2 billion over the past 10 years and [an $800 million] non-operating write-down of assets in 2019, the restructuring is expected to create a sustainably profitable business in India,” the company explained.

At the time of the announcement, Ford’s market share was meager at 1.5%. 

The electric market could be a second chance for the carmaker in the Indian market, which is difficult for foreign carmakers to penetrate.

Electric vehicles represent only 0.34% of retail cars sold in March, but demand is very strong. 

According to the Federation of Automobile Dealers Association, the category of vehicles to which EVs belong recorded a more than tripling (235.5% increase) in retail sales in March compared with the same month in 2021.

And this trend is expected to continue as the Indian government has said that it planned to be carbon-neutral by 2070. Therefore, many companies will receive subsidies and state support to produce electric vehicles.