Why the Mahindra, Ford alliance for electric vehicles is good news but doesn’t mean much

Mahindra and Ford have been in the news since yesterday after signing an agreement to collaborate on the development of Electric Vehicles (EVs) and platform sharing. On the face of it, the deal looks fantastic since both Ford and Mahindra appear to have seemingly profitable takeaways from it.

By: | Updated: September 19, 2017 4:57 PM

Mahindra-Ford alliance

Collaboration between automakers is a common trend these days in the global car industry as companies struggle to find ways to deliver increasing demand for electronics and features while finding ways to penetrate cost-conscious markets such as India. Mahindra and Ford have been in the news since yesterday after signing an agreement to collaborate on the development of Electric Vehicles (EVs) and platform sharing. On the face of it, the deal looks fantastic since both Ford and Mahindra appear to have seemingly profitable takeaways from it. Let's face it, the future of automobiles is electric and India already has an ambitious goal of achieving 100 % electrification for passenger vehicles by 2032. Even if one were to laugh this off, it wouldn't be wise to ignore the huge number of EVs set to be sold even if India meets its target partially. Now as much as one might want to term Mahindra's EV business (formerly and still popularly known as Reva) a failure, the reality is, it isn't. While sales surely haven't been anything to be proud of, Mahindra has had a big advantage by being the first-mover in the EV space in India.

Mahindra in these years has built an immensely valuable bank of technical know-how, which will come in handy when masses start adopting EVs. The company has also nurtured a network of suppliers and dealers, which is key to the success of any vehicle. Battery costs are coming down with every passing year and driving range is going up, which means we're on the way to finding the right balance wherein affordable electric cars might finally be of some use to a mass-market buyer. With more people expected to buy EVs, volumes will grow and economies of scale will be achieved, leading to further reduction in cost.

So where does Ford come into play when it seems Mahindra has it all covered? The part that Ford brings to the table is the only one that Mahindra is short of, which is 'Technology'. Ford is a global leader in automotive technologies and it has put in a lot of work into EVs and autonomous vehicles over the last decade or so. In order to make EVs attractive to someone who can buy a Maruti Suzuki Baleno or any equivalent car for similar or lesser money, batteries will need to offer more range and achieving this is a complex and expensive affair.

Ford has the technical know-how to make electric cars travel more than just 100 odd kilometres in a single charge and also make the batteries charge quicker. However, Ford doesn't have the experience of developing low-cost variants of such technologies and this is where Mahindra brings in its expertise with the Reva.

In terms of business, Ford hasn't done great in India as it has only had two major successes in the form of the EcoSport and the earlier Figo. The Indian operations itself isn't profitable but it does have healthy export numbers, again highlighting the technical muscle of the American company. Clearly, Ford India isn't in a position to invest into a new low-cost EV platform from scratch in hope of selling cars in five to ten years from now. Sharing platform and resources mean big savings for both companies and both have significant takeaways too. In present times, saving cost is the biggest challenge even for the largest carmakers as product life cycles have shortened drastically in the past few years, pressurising carmakers to roll out new features sooner than ever.

So why isn't this partnership going to be a game-changer when everything offered by both companies seems to fit to the 'T' wherever there is a gap? The answer lies in the time-frame decided for this alliance, which is a mere three years. Three years in the automotive world isn't close to being enough to be able to arrive upon developing a sustainable solution for one of the world's most complex market.

Undoubtedly, both parties will walk away with better knowledge about developing better technology at lower-cost but three years seems too short for development of a new platform or a revolutionary car. A derivative of the Reva platform alone isn't going to be enough to overcome the problems associated with EVs. The problem needs to be addressed at the root level and shortcuts don't seem to be the ideal way ahead. Unless both companies look at a longer timeframe, this alliance, I'm afraid is big news but a lost opportunity in one of the world's largest vehicle markets that needs a fundamental change in the mindset of millions to go electric.

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