Ford Motor Co and Mahindra & Mahindra will form a joint venture company in India that will develop, market, and distribute Ford-branded vehicles in the country, as well as Ford and Mahindra vehicles in other emerging markets. Ford will have a 49% stake in the new entity, while India's Mahindra will own 51%.
Ford has been in India since 1995, and its relationship with Mahindra dates back to 2017. Negotiations on the new joint venture were first reported back in April, when a source with knowledge of the project said "it's like a partial exit" from India, and then were detailed last week. The move is part of Ford's global restructuring plan. The automaker is pulling back from markets where it has been struggling; its profits are primarily in North America. Under pressure from shareholders, Ford aims to save $11 billion over the next few years.
Under the terms of the deal, which is likely to be finalised by mid-2020, Ford will transfer its local automotive assets, including both its car manufacturing plants in the country, and employees to the new entity, the companies said in a statement.
Ford says the venture is planned to produce three new Ford-branded utility vehicles, starting with a midsize SUV that will use a shared Mahindra platform and powertrain. Ford-branded vehicles will be sold by the Ford dealer network in India. The joint venture is expected to be up and running by mid 2020. Currently, the Ford EcoSport is produced at the company's plant in Chemnal, India, and Mahindra sells its off-road Roxor in the United States.
By shifting to a joint venture, Ford is changing its India strategy, where it has long run an independent operation in a market dominated by Asian car makers like Suzuki and Hyundai and where several others have struggled to make money. Michigan-based Ford invested more than $2 billion in India over two decades but it has consistently struggled — it has a share of about 3% in a market where Suzuki's local unit, Maruti, is the top player with a 50% share.
"Strong alliances like this play a crucial role in assuring we continue to achieve our vision while at the same time staying competitive and delivering value to our global stakeholders," Jim Hackett, Ford president and CEO said in the statement.
Ford's two car manufacturing plants — one in Chennai in southern India and the other in Sanand in western India, which was inaugurated in 2015 — will be moved to the new joint venture, the companies said. Ford will retain its engine plant at Sanand and its global business center in Chennai.
The new entity, which will be operationally managed by Mahindra, will develop and sell Ford brand vehicles in India and export Ford and Mahindra brand vehicles to emerging markets.
"I think it's a disappointment when I see Ford sitting at the passenger seat, while Mahindra drives, if that will be the arrangement," said Gaurav Vangaal, senior analyst, automotive forecasting at consultancy IHS Markit.
"But looking at a global scenario of rapid transformation in powertrains and a shift to electric, this is a better way to mitigate investment risks," he added.