Ford India’s operations will benefit from Australian manufacturing shutdown

September 5, 2013 • News

Ford Motor Co.’s Indian unit stands to gain from Ford Australia’s 2016 shutdown as the former will most likely be supplying a chunk of its cars to Australia once the carmaker ceases manufacturing in its Broadmeadows and Geelong plants.

Image credit: Flickr user CG Hughes

Image credit: Flickr user CG Hughes

In a report from Livemint, Ford group vice-president and president of Asia-Pacific Dave Schoch said India would play a major role in Australia’s supply.

“The major markets where India would be exporting, Australia is one of them,” Mr. Schoch said in the interview.

“We have started that with EcoSport. The plan is to cease manufacturing operations in Australia by the end of 2016. In the meantime, we are starting to tap into our global product portfolio, and from different regions, like EcoSport and build up our portfolio in Australia.”

Experts say cheaper manufacturing costs in the Asian country and the weaker rupee may have influenced the decision of Ford. The decision to supply to Australia will most likely boost Ford’s production activities in India and will utilize the capacity of its Gujarat plant.

“Their plant in Gujarat is going to get commissioned in a year and it will be logical to take advantage of lower costs and export cars to other countries as, given the state of the Indian auto sector, I don’t think they will be able to utilize the fresh capacity for the Indian market,” said an industry consultant who asked to remain anonymous.

Meanwhile, the nature of the Australian market, which is in favour of completely built units, has forced Ford to shutdown production, says Schoch.

“Out of the 1.1 million Australian market, only about 150,000 units are produced in the country, which is divided among Ford, GM (General Motors) and Toyota. When we looked at the market and the long-term policies of the government on the duties, the fact is we could not achieve the scale,” he said.

Schoch says Ford Australia’s production volume has been somewhere between 30,000 to 40,000 and economies of scale cannot be achieved with that number.

“We had a lot of discussions with the government and a lot of people to make things work, but we just could not get the scale,” Schoch said.

In May, Ford Australia announced that it will cease local manufacturing in October 2016 to better position the company to compete in the highly fragmented and competitive market. The company says the decision was driven by challenging market conditions, particularly the high cost of manufacturing. Ford says their losses in Australia in the last five years have totalled approximately A$600 million.

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