Ford and Mahindra joint venture deal in India, 49:51 stake ratio

KUALA LUMPUR: A joint venture deal will be signed next week between Ford and Indian carmaker Mahindra. Under the said deal, Ford’s independent operation rights in the country would end to a significant extent.

As per reliable sources, the two automakers have been working on a deal for months, under which they’ll create a new company. This new entity will see Ford occupying 49 percent and Mahindra 51 percent stake.

It is also being said that under the new deal, the Detroit-based automaker will transfer a significant part of its employees and assets to the new company. However, it will retain the Sanand-based (in Gujara) engine plant. Fords two factories - in Sanand and Chennai will be moved to the new joint venture. These plants have a total annual manufacturing capacity of 440,000 units.

One of the sources said that the Ford-badged cars would continue to built and sold in India and the new company will export them.

Ford’s spokesperson shared no information on the JV deal. However, she said that Ford was engaged with the Indian automaker “to develop avenues of strategic cooperation that help us achieve commercial, manufacturing and business efficiencies.”

As per the report on the joint venture, Ford will be changing its long-time strategy for the Indian market that until now focused on an independent operation. Ford has invested around US$ 2 billion (i.e., RM 8.4 billion) in India, but has found limited success - its market share rests at 3 percent, while that of Maruti Suzuki is 50 percent.

Ford is said to be under pressure to deliver profits to its shareholders, and so it has been restructuring its business globally, intending to save US $ 11 billion (i.e., RM 46.1 billion) over the next few years.

Ford and Mahindra entered into an agreement in September 2017 to explore a strategic alliance which will focus on several key areas like - product development and electrification. The partnership was to leverage the benefits of Mahindra’s scale in India and successful model lineup, and Ford’s global R&D.

Ford’s collaboration will help increase its reach in India and facilitate Mahindra’s global expansion plans. Others areas of potential cooperation include - the exploration of commercial efficiencies and sourcing, mobility programmes, and connected vehicle projects.

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