In a move aimed at giving its Indian operations a new lease of life, American carmaker Ford Motor Co. announced that it would be selling a 51% stake in its Indian operations to Anand Mahindra-led Mahindra & Mahindra (M&M).
The new joint venture (JV), valued at around ₹1,300 crore, will acquire and manage Ford’s operations in India. Ford India will be transferring its assets, including manufacturing plants in Sanand and Chennai and human resources to the new entity.
Dearborn, Michigan-based Ford has been present in India for over two decades since 1995, but continues to rank at the bottom half of the market share table. It has struggled to make a dent in India’s burgeoning car market with a market share of around 3%. The Indian market has traditionally seen the dominance of Japanese, Korean, and domestic players including Maruti Suzuki, Hyundai, and M&M.
As per the agreement, M&M, a $20.7-billion business house, will manage Ford India’s operations and sell Ford-badged cars through its wide sales and service network across the country and other emerging markets around the world. Piggybacking on M&M’s established sales and service infrastructure may just be the shot in the arm that Ford needed in India. This comes especially at a time when the automobile market in India has been witnessing one of the worst ever slowdowns with buyers staying away from car showrooms owing to a host of factors ranging from a credit squeeze, higher cost of motor insurance, uncertainty over the fate of petrol and diesel cars due to the thrust on electric vehicles, and higher car prices due to the transition to stricter BS-VI emission norms.
Ford and M&M expect the deal to materialise by mid-2020 and is the next step in a tie-up that was first struck in 2017. Under that tie-up, Ford and M&M had agreed to share technological know-how with Ford sharing its expertise in electric mobility and petrol engines with M&M; and the latter sharing its know-how on frugally manufacturing diesel-powered cars.
M&M, which is known for its diesel-powered SUVs, could also plug an essential gap in its portfolio if and when it starts retailing Ford cars in India. Acquisition of a majority stake in Ford’s Indian operations will give M&M access to a product portfolio including hatchbacks and entry-level sedans. The partnership will also give a fillip to M&M’s international passenger cars business.
“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-focussed engineering and its successful operating model, and Ford’s technical expertise, global reach, and access to future technology – are a potent recipe for success,” Anand Mahindra, chairman of the Mahindra Group, said in a statement on Tuesday. “At its core, the partnership will be driven by the shared values of both companies, which are focussed on caring for our customers, associates, and our communities.”
Bill Ford, executive chairman, Ford Motor Co. said in the same statement: “Ford and Mahindra have a long history of working together, and we are proud to partner with them to grow the Ford 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.”
Many carmakers have realised that the best way to bell a lucrative and yet complex Indian auto market is to join hands and share expertise, including product platforms. A recent example of this trend is the agreement between two Japanese peers, Toyota and Maruti Suzuki, wherein the two would be re-badging products from their respective platforms and selling them as an alter ego. The first such product to roll out in India is the Toyota Glanza, which is essentially the re-badged Suzuki Baleno, a premium hatchback that Maruti Suzuki has successfully sold in India.
Ford and M&M’s statement also hinted at a similar collaboration. The JV will introduce three new utility vehicles under the Ford brand, beginning with a new midsize SUV that will have a common Mahindra product platform and powertrain, the two companies said. Other areas of collaboration will include the use of Ford’s brand distribution network in emerging markets to sell Mahindra-badged cars.