Mahindra, Ford call off joint venture plan
04 Jan 2021
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Mahindra & Mahindra and Ford Motor Company have decided to scrap their planned joint venture, more than a year after the two auto majors signed a strategic agreement to create a joint venture to develop, market and distribute Ford brand vehicles in India, and Ford brand and Mahindra brand vehicles in high-growth emerging markets worldwide.
Mahindra was to hold 51 per cent stake in the proposed JV with Ford owning a 49 per cent stake. Ford was to transfer its India operations to the JV, including its personnel and assembly plants in Chennai and Sanand, as per the agreement.
Ford’s engine plant in Sanand as well as the Global Business Services unit, Ford Credit and Ford Smart Mobility were outside the purview of te JV.
The JV was aimed at exploiting new mobility opportunities, among other things. To grow the Ford brand in India and exporting its products to Ford entities globally. While Ford-branded vehicles were to be distributed through the Ford India dealer network, Mahindra would continue to operate its own independent dealer network in India. Importantly, there were to be planned synergies in product portfolio, sourcing and manufacturing, which would have achieved substantial cost savings.
The JV was expected to be operational by mid-2020, subject to regulatory approvals. It was to be operationally managed by Mahindra, and its governance will be equally composed of representatives of Mahindra and Ford.
In an official statements issued in the closing hours of the New Year’s Eve, Ford and Mahindra & Mahindra said the two automakers have mutually and amicably determined that “they will not complete a previously announced automotive joint venture between their respective companies.”
The decision follows the passing of the 31 December “longstop,” or expiration, date of a definitive agreement the organisations entered into in October 2019.
"This decision will not have any impact on the company’s product plan. It is well positioned in its core true SUV DNA and product platforms with a strong focus on financial performance. In addition, the company is accelerating its efforts to establish leadership in Electric SUVs," as per ehe statement issued by Mahindra & Mahindra in the early hours of 1 January 2021.
The new development comes after Ford and Mahindra have already gone far down the road with Ford’s next big launch the C-SUV (code: C757) which is based on the next-gen Mahindra XUV500 (code:W601). The W601 is due for launch in the first half of 2021 whilst For’s equivalent C-SUV is slated for an early 2022 launch. It is hence likely that Ford will enter into a contract manufacturing arrangement with Mahindra to build the C-SUV in its Chakan plant.
Ford is also likely to source engines from Mahindra going forward. The upgraded Ecosport due in mid-2021 will be powered by a Mahindra’s 1.2 TGDI (G12) motor. The Ford C-SUV too will be use the same 2-litre petrol and 2.2 diesel engines that will power the next XUV500.
The decision to call off the JV, according to the companies, “was driven by fundamental changes in global economic and business conditions – caused, in part, by the global pandemic – over the past 15 months. Those changes influenced separate decisions by Ford and Mahindra to reassess their respective capital allocation priorities.”
Ford said its independent operations in India will continue as is. Ford is “actively evaluating its businesses around the world, including in India, making choices and allocating capital in ways that advance Ford’s plan to achieve an 8% company adjusted EBIT margin and generate consistently strong adjusted free cash flow.
Ford’s plan calls for developing and delivering high-quality, high-value, connected vehicles – increasingly electric vehicles – and services that are affordable to an even broader range of customers and profitable for Ford. The company is moving quickly to
Mahindra has released an official statement on the latest developments in which it said, “ the two companies have “mutually, amicably determined they will not complete a previously announced automotive joint venture between their companies“.
The outcome was driven by fundamental changes in global economic and business conditions – caused, in part, by the global pandemic – since the agreement was first announced. Those changes influenced separate decisions by Ford and Mahindra to reassess their respective capital allocation priorities, it added.
Mahindra said that this decision will not have any impact on its product plan. It is well positioned in its core true SUV DNA and product platforms with a strong focus on financial performance. In addition, Mahindra is accelerating its efforts to establish leadership in electric SUVs.
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