Ford and Mahindra have confirmed a new joint venture in India, heralded last week by a media report. This is the second time in six months the Detroit automaker has handed control of most of its operations in a once-promising emerging market to a local partner and follows the March 2019 decision to end the Russian passenger car making joint venture with Sollers to focus on the still-profitable Transit commercial van JV. Ford had announced in January it was putting that business under review as part of a broader restructuring of its loss-making Europe region.
Now it's India's turn and this new JV follows the steady development of a strategic alliance the pair first announced back in September 2017. At that time, areas of potential cooperation included: mobility, connected vehicles, electrification, product development, sourcing and commercial efficiencies, distribution within India plus improving Ford's reach in the country and global emerging markets while also beefing up Mahindra's presence outside India. Teams from both companies were to collaborate and work together for a period of up to three years with any further strategic cooperation to be decided at the end of that period.
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In March 2018, Ford and Mahindra said they would jointly develop new SUVs and a small electric vehicle as part of several new initiatives. They signed five new memoranda of understanding (MoU) that further strengthened the strategic alliance and accelerated the development of new products for consumers in India and emerging markets. That was followed by an October 2018 announcement Mahindra would supply Bharat Stage VI (BS-VI) compliant petrol engines to widen Ford's India range and the two companies would jointly develop connected vehicles.
Today's announcement, Ford and Mahindra said in a joint statement, "marks a new era of collaboration, using the strengths of both companies to deliver operational excellence and value to stakeholders". The partnership would allow them "to offer new product to customers faster than before" and, critically, would "deliver profitable growth to both companies".
Ford is, however, the minority shareholder with a 49% stake while Mahindra has control with 51% of the new JV valued at INR1,925 crores (a crore is INR10m; hence total value of US$275m).
The pair expect "enhanced competitiveness through greater economies of scale across the automotive value chain, including optimised sourcing, product development, use of relevant technologies and a global network".
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By GlobalDataThe JV would develop, market and distribute Ford brand vehicles in India and Ford brand and Mahindra brand vehicles in "high-growth emerging markets around the world".
Ford would transfer its India operations to the joint venture, including personnel and assembly plants in Chennai and Sanand but would keep the engine plant in Sanand plus back office operations such as its Global Business Services unit, credit and smart mobility.
"The joint venture is the next step in the strategic alliance forged between Ford and Mahindra in September 2017 and is expected to be operational by mid-2020, subject to regulatory approvals," the automakers said.
The JV will be operationally managed by Mahindra, and its governance will be equally composed of representatives of Mahindra and Ford."
The parties stressed that, while the JV would be responsible for growing the Ford brand in India and exporting its products globally, Ford would continue to own its brand and distribute its branded vehicles through the current India dealer network.
Mahindra would continue to own its brand and operate its own independent dealer network in India.
The joint venture expects to introduce three new utility vehicles under the Ford brand, beginning with a new midsize sports utility vehicle that will have a common Mahindra product platform and powertrain.
Ford and Mahindra will also collaborate to develop EVs for emerging markets.
The pair see the JV as a "catalyst for growth for the Ford and Mahindra brands in emerging markets, which are growing at double the rate of the global industry".
The joint venture will use the Ford distribution network in emerging markets to extend support for export of Mahindra products, in addition to Ford branded vehicles.
Exports today form about 7% of Mahindra's auto business revenues and its products are exported to South Africa, Nepal, Bangladesh, Sri Lanka and Chile, among other nations and areas.
"Emerging economies including India are expected to account for one in three future vehicle sales," said Pawan Goenka, managing director, Mahindra & Mahindra.
"The joint venture will have a distinct product portfolio with shared platforms and powertrains, the newest technology, high quality and engineering standards from both Mahindra and Ford, at optimised costs. This winning combination will enable the joint venture to successfully position its vehicles in India, as well as unlock the potential of other highly competitive emerging markets".
"Mahindra and Ford coming together is a testament to the long history of cooperation and mutual respect between the two companies. Our combined strengths – Mahindra's expertise in value-focused engineering and its successful operating model, and Ford's technical expertise, global reach and access to future technology – are a potent recipe for success," said Anand Mahindra, chairman, Mahindra Group.
"Ford and Mahindra have a long history of working together, and we are proud to partner with them to grow the brand in India. We remain deeply committed to our employees, dealers and suppliers, and this new era of collaboration will allow us to deliver more vehicles to consumers in this important market," said Bill Ford, executive chairman, Ford.
"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," said Jim Hackett, Ford's president and CEO.
"Strong alliances such as this play a crucial role for Ford to compete profitably in the high-volume, affordable vehicle segments so popular with our diverse customer base. By combining our respective talents, we will offer more vehicles to more customers in more places than ever before and deliver profitable growth to both Ford and Mahindra," said Jim Farley, president of Ford new businesses, technology & strategy.
Ford said its newly established International Markets Group (IMG) business unit would play a key role in the JV process. IMG brings together 100 high-potential, emerged and emerging markets including India Australia, ASEAN, Middle East, Africa and Russia. In addition to the established Ford Ranger and US import businesses in IMG, the formation of this joint venture will add to IMG's portfolio vehicles specifically tailored for emerging markets, and it places India at the centre of Ford's strategy for IMG.
Mahindra claims to have led the utility vehicles segment in India for the past seven decades and to be the "only player" with a range of electric vehicles
commercially available in India.
Mahindra also owns a majority stake in South Korea's growing Ssangyong Motor Company in Korea and operates in the shared mobility sector through
investments in rides haring platforms in the United States.
Ford was among the first global automakers to enter India in 1995 and claims to be one of the largest exporters of vehicles from the country
India is also its the third-largest employee base globally, with more than 14,000 people working across the India and global business services operations
in Delhi, Chennai and Coimbatore.
See also: India's quiet achiever – the rapid rise of Mahindra
