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Ford is latest global carmaker to struggle in India

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After almost 30 years and with only a toehold in the market to show for it, Ford faces crunch time in India, a country which has consistently thwarted the ambitions of global carmakers.

“We are assessing our footprint in India,” Lynn Antipas Tyson, Ford’s executive director of investor relations, told an investor conference this week.

“We want to make sure that we’re allocating capital to opportunities that are profitable.”

Ford’s three decades long investment in the country, which included a concerted push by former chief executive Alan Mulally, has left the Michigan carmaker with just 2 per cent of the Indian market.

The company announced in December that it was “actively evaluating” its operations there after a planned joint venture with Mahindra & Mahindra was scuttled on December 31, a year after it was announced.

Now Ford must decide whether to plough more money into Indian operations, begin manufacturing vehicles only for export, or to pull out of the country entirely. Ford took that route two months ago in Brazil.

“India has been this impossible nut to crack for the auto industry,” said Mike Ramsey, Gartner analyst. “I’m not sure [Ford] did anything disastrous. They’re just on the pile of companies that can’t quite figure out the right way to sell into this market.”

Global carmakers are drawn to the size of the Indian market — the fifth largest in the world by volume. India is expected to pass Japan in third place over the next decade, according to consultancy LMC Automotive, as its economy grows and incomes rise.

Nearly half of Indian car buyers plump for a Maruti Suzuki © Prashanth Vishwanathan/Bloomberg

But most foreign carmakers have struggled to price their vehicles low enough to appeal beyond India’s urban elites. And high taxes, which can add up to about half the value of the vehicle, eat away at their profits.

Rivals Toyota, Honda and Renault are doing little better than Ford at 3 per cent market share apiece. Instead, nearly half of Indian car buyers turn to Maruti Suzuki, a 40-year-old Indian subsidiary of the Japanese carmaker, that dominates the market with efficient, low-priced vehicles.

Car groups generally have tried to sell products developed for other markets in India, said Ammar Master, LMC analyst. They invested more in other markets, particularly in China, sold too few models in India and did not refresh them often enough.

Ford did focus on the country for a few years about a decade ago. India became a priority after the company struggled to differentiate itself from competitors in a crowded Chinese market, Ramsey said.

It was a component of Mulally’s plan to take Ford to 8m sales globally, and the manufacturer invested $500m to double the production capacity at its Chennai plant to make the Ford Figo, a small saloon.

“We are entering the sweet spot of the Indian market,” Mulally said in 2009 at the launch in New Delhi. “It’s a game-changer for our Indian operation.”

But the sales did not materialise, forcing the company to shift towards making vehicles for export in 2013. Mulally’s successor, Mark Fields, said in 2016 that the company was re-evaluating its Indian operations, a reckoning that continued under Jim Hackett in 2017, and has now passed to new boss Jim Farley.

Ford’s India operations lost $23m in 2020, down from a loss of $804m in 2019. The company’s “strategy of mostly focusing on one product at a time — one-hit wonders, if you will — in India mirrors the approach of other global automakers,” Master said.

“Without the influx of a steady stream of new vehicles to enthuse Indian buyers, it is hard to win against well-entrenched market leader Maruti Suzuki and its horde of fiercely loyal buyers.”

Rishabh Sheth, the owner of a dealership in Mumbai that used to sell Ford cars, said the company faced challenges including slow product cycles, expensive maintenance and limited fuel efficiency. All this damped their appeal with value-conscious Indian consumers, he said.

“The cars were great to drive, but there was only a select audience to which this appealed,” he said. “People were looking at more fuel-efficient cars, cars that were comfortable and easy to maintain.”

Sunil Dutt used to drive a Ford in his previous job as a driver at an international non-profit organisation. But he argued that it was no match for competitors like Maruti Suzuki or Hyundai. He has personally owned two Maruti Suzukis.

Ford “is a good machine”, he said, but Maruti would win out any day. “Firstly, it’s a [local] brand. Secondly, it’s comfortable, it’s designed for Indian roads. And thirdly, the maintenance is available” from local mechanics.

Other vehicle manufacturers have abandoned the country when they failed to increase their market share.

General Motors gave up in 2017, and motorcycle manufacturer Harley-Davidson announced last year that it too would quit the country, the world’s largest two-wheeler market, after struggling to compete with local vintage brands like Royal Enfield.

MP Shyam, a Ford dealer in southern India who has been with the company since 1996, said he thought the company was committed to India for the long run.

“Like every business you go through some good cycles and bad cycles,” he said. “They’re not a typical American company where they come in and say, ‘Hey, things aren’t working out so we’re going to get out.’”

But analysts say this is one of the options Ford must be considering, even if it decides to relaunch in the country later.

LMC forecasts that, based on Ford’s current production outlook, the company will only use 20 per cent of its production capacity, which can churn out 440,000 vehicles in a year. Underused capacity is a major drag on profits in the motor industry.

“They can’t survive in India with those volumes,” Master said.

India’s potential as a growth market took a deeper hit in 2019 when the car market entered into its deepest slowdown in decades, prompted by everything from a broader economic slowdown to an explosion of car-sharing.

This, along with the longer-term changes such as the rise of electric vehicles, has prompted many to rethink their approach to the country, said Puneet Gupta, analyst at IHS Markit.

“It’s not only Ford which is revisiting their India strategy. Every [carmaker] today is revisiting their India strategy,” he said. “The next two decades are going to be different from the last two decades.”



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Israel conflict rattles rapprochement with Arab countries

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When the United Arab Emirates shocked the Arab world by normalising relations with Israel it said the move would help ease the protracted Arab-Israeli conflict. But nine months later, the wealthy Gulf state finds itself in a difficult position as its newest ally bombards the impoverished Palestinian territory of Gaza.

Israeli war planes and artillery have been pounding Gaza while Hamas, the group that controls the territory, has fired rockets into Israel. On Sunday morning, death toll in Gaza stood at 181, including 83 women and children, local health officials said.

Ten people have died inside Israel, including two children, local medics have said.

While almost a third of Arab countries now have relations with Israel, this week’s bloodshed shows that diplomatic ties ushered in by last year’s so-called Abraham Accords have given them little leverage and done nothing to ease the root cause of the protracted crisis — the Jewish state’s conflict with the Palestinians.

“They [the UAE] are clearly in a very difficult position. On one hand, the UAE’s interests with Israel are long term and strategic, so ideally their relations should be resilient to shocks,” said Cinzia Bianco, a visiting fellow at the European Council on Foreign Relations. “At the same time, the UAE obviously claimed that the Abraham Accords would give them leverage to also support the Palestinians and rein in Israel’s aggressions against them.”

So far, Israel has rejected all international efforts pushing for a ceasefire. But Bianco said Abu Dhabi could still deploy diplomatic leverage to pressure the Jewish state to limit the scale of its retaliation. Such intervention, however, could jeopardise progress on joint projects of strategic value to the UAE, she added. 

Recent collaborations include plans for Emirati and Israeli defence manufacturers to develop a system to counter drones.

The normalisation of relations between Israel and the UAE under the Abraham Accords was quickly followed by similar moves from Bahrain, Sudan and Morocco, that marked a radical departure from the established Arab stance towards the Jewish state.

The Arab position before the accords was that they would recognise Israel only if there was a just settlement with the Palestinians that led to the creation of a viable Palestinian state. The transactional deals brokered by the Trump administration, which pursued an overtly pro-Israel stance, left the Palestinians feeling isolated and betrayed. Critics said Arab states had given up a bargaining tool and gained little in return, warning the moves would be exploited by more militant Palestinian factions.

Like other members of the Arab League, the UAE endorsed an appeal on Tuesday to the International Criminal Court to “investigate war crimes and crimes against humanity” committed by Israel against the Palestinians.

“The UAE stands with the rights of Palestinians, for the end of the Israeli occupation and with a two-state solution with an independent Palestinian state with East Jerusalem as its capital,” said Anwar Gargash, diplomatic adviser to the UAE president, this week. “This is a historic and principled position that does not budge.”

The UAE foreign ministry was last month quick to condemn Israeli plans to evict Palestinians from their homes on land claimed by Israeli settlers. And when clashes broke out between armed Israeli police and rock-throwing Palestinian youths, the UAE urged Israeli authorities to reduce tensions.

The UAE’s clear public stance has given cover for Emiratis and residents in the autocratic state to condemn Israeli actions and express support for the Palestinians, after any local anger at the earlier decision to normalise relations was suppressed at the time. Apart from a fringe of Emirati online activists who have sided with Israel, most social media reaction — even from some ministers — has been pro-Palestinian.

“Normalisation [of relations] is irreversible but it is very difficult to defend and even talk about in these circumstances,” said Abdulkhaleq Abdulla, a Dubai-based political science professor.

After the UAE signed its accord, there was speculation about whether Saudi Arabia, Israel’s main prize, would follow suit. Like Abu Dhabi, Riyadh has been covertly co-operating with Israel on intelligence and security matters as they share the goal of countering Iran.

But this week’s Israeli assault on Gaza makes that appear ever more remote. Saudi foreign minister Prince Faisal bin Farhan on Sunday said the kingdom “categorically rejects the Israeli violations against Palestinians”, while calling for an immediate ceasefire. 

In Morocco, which established relations with the Jewish state in October in return for US recognition of Moroccan sovereignty over the disputed territory of Western Sahara, the foreign ministry said it was watching events “with deep concern”.

In 2014, during the last major war between Israel and Hamas, thousands of protesters, including government ministers, took to the streets across Rabat, the capital. This time Moroccan police dispersed a small pro-Palestinian protest in the city this week. The newly formed Morocco-Israel Business Council was also reported to have postponed a virtual meeting aimed at encouraging Moroccan investment in Israel.

Public sentiment in the Arab world remained strongly pro-Palestinian, said HA Hellyer, senior associate fellow at the Carnegie Endowment for International Peace. “The absence of protests isn’t an absence of the desire to protest but an absence of permission to protest.”

Restrictions on freedom of speech across the region made it harder to gauge the extent of public anger, Hellyer said, but social media and the extensive coverage on mainstream television showed the “Palestinian question” was still close to Arabs’ hearts.

“Almost half of the messages I received on Thursday for the religious festival marking the end of Ramadan, show pictures of the Dome of the Rock in Jerusalem,” he added.



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Chilean voters prepare to elect country’s constitutional legislators

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Chile will this weekend vote in the legislators who will draw up its new constitution, with the country’s centre-right government facing a battle to maintain its grip on power ahead of a presidential election in November.

Gubernatorial, mayoral and municipal polls that were postponed because of the pandemic will also take place on Saturday and Sunday, alongside the election to populate the constitutional assembly.

Chile has not been spared the coronavirus second wave that has hit Latin America despite it having the highest vaccination rates in the region. Confirmed infections reached their highest ever level last month, although numbers have since declined.

“Chile is doing several historic and unprecedented things at the same time . . . in the middle of the economic and health crisis brought on by Covid-19,” said Robert Funk, a political scientist.

The most important vote will select members of the constituent assembly charged with rewriting the constitution drawn up during the 1973-90 dictatorship of General Augusto Pinochet — which most Chileans regard as illegitimate.

Nearly four-fifths of voters opted in favour of reforming the constitution in a referendum in November.

“These elections will probably define Chile’s institutional course over the coming decades,” said Gloria de la Fuente of Chile’s transparency council. “The vote will have a profound effect on Chile’s political system and civil society . . . electing the authorities to bring the country’s agenda forward.”

Yet turnover is predicted to be lower than the referendum. Some 58 per cent of Chileans who took part in a recent Ipsos poll said they were less likely to vote due to the pandemic, while less than half knew they would be voting for four different positions.

Chile has in recent decades become one of Latin America’s wealthiest nations, even if the deep inequality that sparked widespread social unrest in 2019 is far from resolved.

The low approval ratings for President Sebastián Piñera since those demonstrations have been exacerbated by defeats for his government in Congress, notably over pensions reform.

While the leftwing coalition that dominated Chile for most of the past 30 years has disintegrated since Piñera returned to power in 2018, his unpopularity could allow the left and centre-left to secure the two-thirds majority in the constituent assembly required to pass each article of the new document.

“If the right gets more than 30 per cent [in the assembly], it will be a tremendous victory,” said Lucia Dammert, a sociologist at the University of Santiago.

Despite the relative success of its vaccine rollout, Chile has been hard hit by the coronavirus crisis. Last summer’s peak of a weekly average of 352 daily cases per million was surpassed last month, reaching 383. Cases have since fallen back to about 280 cases per million.

However, Piñera’s government has been able to offer more generous Covid-related subsidies than most other countries in the region.

A feature of this weekend’s polls has been the emergence of independent candidates, Dammert said. Yet although the traditional parties had been badly wounded by the political turmoil, it would be “an uphill battle” for the independents to gain recognition, she said.

There are also wild cards such as Pablo Maltes — husband of Pamela Jiles, a populist presidential hopeful — who is running for governor of the metropolitan region of the capital Santiago.

“If Maltes wins, then there’s definitely something going on with Jiles,” said Funk, as it would suggest she was a strong contender for the presidency.

Jiles, who has championed measures to withdraw funds from Chile’s vaunted private pension system, is one of a number of presidential hopefuls, with no single candidate on the right or left enjoying a clear lead.

Electoral reform under the previous leftwing government of Michelle Bachelet that increased proportional representation means Chileans will for the first time also elect regional governors in a country where power has traditionally resided firmly in Santiago. The elections will also renew nearly a third of local authorities.



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China lands spacecraft on Mars

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China has landed a spacecraft containing a rover on Mars, according to state media, in a further sign of its bold ambitions in the sphere.

The rover was part of the Tianwen-1 unmanned mission launched in July last year. Tianwen means “questions to heaven” and was named after a poem by Chinese poet Qu Yuan.

The mission, which was described by Chinese media as a “new major milestone” and the “first step in China’s planetary exploration of the solar system”, was intended to match the US by successfully landing on the red planet.

The Global Times reported that the lander and the rover from the Tianwen-1 probe reached a plain on Mars called Utopia Planitia on early Saturday morning local time, citing information from the China National Space Administration.

The Tianwen-1 probe’s lander and rover separated with the orbiter at about 4am, after which it had a three hour flight before entering Mars’ atmosphere, according to the newspaper.

The spacecraft then “spent around nine minutes decelerating, hovering for obstacle avoidance and cushioning, before its soft landing”. The rover is named Zhurong after a Chinese god of fire, and is 1.85m and weighs 240kg. It is expected to transverse the planet for about 92 days.

The probe was launched into space on July 23 by the Long March 5 rocket from the Wenchang launch pad in Hainan province, in the south of the country.

The achievement of the Mars landing is part of a wider expansion of China’s space programme. The country’s engineers launched the first part of its permanent space station into the Earth’s orbit late last month.

In 2018, China for the first time launched more vessels into orbit than any other nation.

The US views China’s efforts in space in strategic terms. “Beijing is working to match or exceed US capabilities in space to gain the military, economic and prestige benefits that Washington has accrued from space leadership,” according to the annual threat assessment published by the office of the US director of national intelligence.



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