Some 4,000 Indian employees will be hit by the closure. Instead of focusing on India, the company is going to doubledown on China where it sells more of its luxury Lincoln brand than in the US. The closure is another blow to Prime Minister Narendra Modi’s “Make in India” drive and bid to create manufacturing jobs.

The world’s fifth-largest automaker was one of the early foreign players to enter the Indian market 25 years ago but even though it had a strong stable of vehicles it never managed to crack the price-conscious Indian market with bestselling models.

“We are taking difficult but necessary actions to deliver a sustainably profitable business longer-term and allocate our capital to grow and create value in the right areas,” Ford Chief Executive Officer Jim Farley said in a statement. In January, Ford exited Brazil where it had manufacturing operations for more than a century.

Ford becomes the second US automobile giant to pull out of India. General Motors, the world’s fourth-largest automaker, exited the country in 2017. Cult motorcycle company Harley Davidson also stopped manufacturing bikes in India last year.

Ford India said it had built up losses of $2 billion in the last decade and wrote down the value of its business by nearly $1 billion two years ago. Ford said it had no alternative but to shut down its two plants in Gujarat and outside Chennai. It will continue to manufacture engines for export at its Chennai plant.

“Demand for new vehicles (in India) has been much weaker than forecast,” said the company, which had a paltry market share of 1.4 per cent in August. Maruti and Hyundai hold more than 60 per cent of the market.

Ford's sales in greater China — the world's largest auto market and a leader in adoption of electric vehicles — climbed 24 per cent year-over-year in the first half of 2021 from a year earlier.

Ford India CEO Anurag Mehrotra said the shutdown came because of, “increasingly challenging market conditions including the extended slowdown of India’s auto industry as well as cumulative losses of about $2 billion.”

It has become increasingly clear over the last couple of years that Ford would be unable to turn around its domestic market situation in any meaningful way. In 2019, Mahindra and Ford ended the joint venture they had formed to make a new thrust in the market and for exports but it was shut down after a short time. In July, Ford’s plants were operating at only 20 per cent capacity. The Sanand plant is likely to close by year end and the Chennai plant next year.

In 2019 Ford India was the largest automobile exporter from India, narrowly beating Hyundai for the top spot. Interestingly, the largest chunk of Ford’s exports went to the US. The company exported to 37 countries from India. Ford has invested in large facilities in India and its Chennai plant could produce 2 lakh vehicles annually and 3.4 lakh engines. At Sanand it could produce 2.4 lakh vehicles and 2.7 engines annually. It manufactured several models in India that were successful abroad like the EcoSport, the Figo and the Aspire.

The company says it will continue to import iconic models like the Mustang and the Endeavour. It will also maintain spare parts in several cities including Calcutta for the million or so Ford vehicles that are on the road in this country. It will also continue alliances with components suppliers for its engine manufacturing operations.

GM is still embroiled in disputes with its workforce. It had hoped to sell its Talegaon plant to the Chinese Great Wall Motors. However, in the wake of the Ladakh standoff, Great Wall has put off its plans to enter the Indian market.

The Ford and GM pullouts have come after a few disappointing years for the Indian auto industry, especially in the wake of the pandemic which hit sales hard. However, even before the pandemic, sales growth had begun to slow.