Vietnamese employees weld in the body shop at the Ford automotive plant in the northern province of Hai Duong on January 11. Photo: CFP

US automaker Ford Motor's recent decision to stop making vehicles in India dealt another blow to the South Asian country's goal to bolster its manufacturing industry under Prime Minister Narendra Modi and laid bare growing risks and difficulties for foreign companies in India, Chinese analysts said on Sunday. 

After 25 years of production in India, cumulative operating losses of more than $2 billion over the past 10 years and an $800 million non-operating write-down of assets in 2019, Ford said that it will stop making vehicles for sale in India as part of a restructuring to create a sustainably profitable business in India. The decision is expected to cause 4,000 local workers to lose their jobs.

Ford's move is another example of the failure of the Indian government's "Make in India" strategy despite the so-called political partnership with the US, Chinese experts said.

In stark contrast with what is happening in India, Ford is accelerating its pace in the Chinese market.  Ford China's sales in the first half of 2021 increased by 24 percent year-on-year, and for the fifth consecutive quarter, it achieved a year-on-year increase in adjusted EBIT, according to the company's latest financial report.

Ford closed its Indian factory in order to cut its losses, but its prospects in China are very bright, given the promising and huge potential of China's car market, Cui Dongshu, secretary-general of the China Passenger Car Association, told the Global Times on Sunday.

Indian demand is relatively weak, while demand in the Chinese market remains robust, especially for high-end cars and new-energy vehicles (NEV) driven by a consumption upgrade and the support policy for the NEV industry, said Cui.

In July, China accounted for 53 percent of the world's NEV sales. The electric vehicle industry in India, however, is far behind, with less than 1 percent of total vehicle sales. China also ranks first in the world in terms of the number of motor vehicles on the road and the increase in that number, industry data showed.

Previously, General Motors stopped making cars in India. With the Indian car market now dominated by Maruti Suzuki's low-priced cars, it is difficult for many foreign automakers, including Ford, to gain a share, industry insiders said.

In addition to the market potential, China's reliable and complete supply chain is another reason that it outcompetes India in the global car industry. 

While India's labor costs are low, the country is at disadvantage in many other important areas, including labor skills, the maturity of the production line, supporting facilities such as logistics, and most important, the market's potential consumption, experts said.

Ford's move not only sounded the alarm for Modi's goal to strengthen the country's manufacturing industry but also provides another indication of the failure of "Make in India," since some large multinational companies are no longer optimistic about the room for growth and development in India, Qian Feng, director of the research department at the National Strategy Institute at Tsinghua University, told the Global Times on Sunday.

Qian noted that this move might signal shrinking foreign investment in the manufacturing industry in India, which, "instead of being determined by the rhetoric of politicians, is more objective when it comes to the economic and market situation and government policy."