Ford and India’s Mahindra & Mahindra are likely to sign a deal next week to form a joint venture in India, two sources told the Reuters news agency, in a move that would result in the US automaker ending most of its independent operations in the country.
Rival General Motors in May 2017 ended sales in India [and South Africa], shifting local operations to production of vehicles only for export.
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Reuters reported last April Ford and Mahindra had for months been structuring the deal to create a new entity in which Ford would hold a 49% stake while its Indian rival held 51%.
The latest report said Ford would transfer most of its automotive assets and employees in India to the new company but would retain an engine plant in Sanand in the western state of Gujarat.
A Ford spokeswoman did not comment directly to Reuters on the deal but said the company was engaged with Mahindra “to develop avenues of strategic cooperation that help us achieve commercial, manufacturing and business efficiencies”.
Mahindra did not respond to Reuters’ request for comment.
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By GlobalDataBy shifting to a joint venture, the report noted, Ford was changing its decades-old India strategy focused on running an independent operation. Under pressure from shareholders to make profits, it has been globally restructuring its businesses with an aim to save US$11bn over the next few years.
But Ford’s decision is a setback for the country at a time when prime minister Narendra Modi’s administration is trying to boost local manufacturing by cutting corporate tax rates and offering cheap loans to push car sales. Sale of cars by manufacturers to dealers have fallen at their steepest pace in two decades, the report added.
Ford’s two manufacturing plants – in Chennai in southern India and the other in Sanand inaugurated in 2015 – will be moved to the new joint venture, but Ford will keep the engine plant at Sanand, Reuters said.
Combined maximum annual manufacturing capacity is 440,000 vehicles.
Ford brand cars would continue to be built and sold in India and exported by the new company, one of the Reuters sources said.
The report noted that, over 20 years, Ford invested over US$2bin in India but had consistently struggled – it currently has a share of about 3% in a market where top performing Maruti Suzuki has 50%.
“The Mahindra deal is an opportunity for Ford to recover some of the money it has invested in India,” one Reuters source said.
Ford manufactures and sells cars in India via a wholly owned subsidiary.
In 2017 it formed a strategic alliance with Mahindra under which they would develop new cars together, including SUVs and electric variants.
