In an unexpected move, US carmaker Ford has announced its intention to resume manufacturing at its Chennai plant, two years after halting production in India, following a three-decade-long presence in the country.
The company has submitted a Letter of Intent (LOI) to the Tamil Nadu Government, confirming its plan to utilise the facility for export-oriented manufacturing. This announcement follows a meeting between the Ford leadership and the Tamil Nadu Chief Minister during his recent visit to the United States.
“We intend to leverage the manufacturing expertise available in Tamil Nadu to serve new global markets,” said Kay Hart, President of Ford International Markets Group, in a statement.
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The Chennai plant will play a pivotal role in Ford’s Ford+ growth plan, focusing on producing for global export markets. Cost competitiveness, facilitated by the Chennai operations, appears to be a key factor behind this renewed strategy.
When asked about the rationale for this new plan, months after shutting down local manufacturing, a company spokesperson told BusinessLine that Ford’s decision to restart manufacturing for exports in Chennai is aligned with its Ford+ global strategy, aimed at enhancing the company’s competitive edge.
Further details regarding the type of production — whether vehicles or engines — along with plans for staff hiring, vendor development, and targeted export markets will be disclosed in due course. “Ford’s proposal to restart manufacturing in Chennai aligns with India’s established strength in automotive manufacturing, including its robust components industry. Ford has a history of sourcing and producing engines in India, making vehicle manufacturing a natural, synergistic next step, Ashim Sharma, Senior Partner and Group Head at Nomura Research Institute Consulting & Solutions India told BusinessLine. With exports nearing 6.7 lakh cars in the last fiscal year, manufacturing in India for global markets is a growing trend among automakers. This move is also a crucial strategy for diversifying supply chains and producing higher-quality products at lower costs, he added.
In September 2021, Ford announced its exit from vehicle manufacturing and sales in India, closing two factories — Maraimalai Nagar near Chennai and Sanand in Gujarat. The Blue Oval brand stated that the slowdown in the Indian automotive market, regulatory tightening in its export markets, and accumulated losses led to the decision to ramp down its manufacturing in India, adversely affecting 4,000 jobs and its country-wide dealership network. While it sold the Sanand car plant to Tata Motors, it was unable to find a buyer for its Chennai facility. In September 2023, the company finalised the severance package with the Chennai Ford Employees’ Union (CFEU), representing 2,592 permanent employees.
Although Ford has ceased vehicle production, it continues to operate its IT division, Ford Business Solutions, which employs about 12,000 people in Tamil Nadu, with plans to expand by an additional 2,500 to 3,000 employees over the next three years. Along with its engine manufacturing facility in Sanand, India remains Ford’s second-largest salaried workforce globally.