Ford Motor Company and Mahindra & Mahindra are nearing the close of a deal to form a new joint-venture company in India. According to a Reuters report, this deal will likely be the end of the American car manufacturer's independent operations in the country. The move will make Ford the latest car manufacturer to pull back on its operations in India, joining the likes of General Motors which stopped selling in the Indian market in 2017. Ford has invested more than $2 billion in India over the past two decades but has struggled consistently - holding only 3% of the market share in one of the world's fastest-growing car markets.
Under the terms of the deal being negotiated, Ford will form a new unit in India in which it will hold a 49 percent stake, while Mahindra will own 51 percent, the two sources said. The US carmaker's Indian unit will transfer most of its current automotive business to the new entity, including its assets and employees, according to one of the sources.
"It's like a partial exit (for Ford from India)," the source said. The deal is expected to close within 90 days, the sources said, adding the value of the transaction was not yet clear. In 2017, Ford formed a strategic alliance with Mahindra under which, among other things, they will build new cars together, including sport-utility vehicles and electric variants.
Ford said it does not comment on speculation, but added both companies continue to work together "to develop avenues of strategic cooperation that help us achieve commercial, manufacturing and business efficiencies".
Mahindra too said it does not comment on speculation. It said in a statement it was "working together in identified areas" with Ford after a 2017 partnership arrangement, and "will announce further definitive agreements as we progress on some of the other areas."
Pros of Ford-Mahindra joint-venture:
Bringing technical expertise from both the manufactures together will make way for more competitive prices for the buyers, also because manufacturing costs should come down since the supplier network of both manufacturers will be shared.
With Mahindra's market understanding and Ford's technological advancement combined, the products of this joint-venture will be more accurately aimed at Indian buyers.
In terms of electric vehicles, Ford's expertise and Mahindra's vast network base should be able to bring down development costs and prices of the jointly-developed electric cars as well.
Cons of Ford-Mahindra joint-venture:
Ford cars have for years been known for being drivers cars. The prices may have been comparatively higher, but they do promise peppy performance and handling. With joint development with Mahindra, the products will likely be engineered to focus more on mass-market sales.
While Ford has not made an official statement yet, but if its independent operations are to end in India the future of Ford Mustang will become uncertain in the country. It may not be a product that sells in big numbers but the Mustang is by far one of the most iconic cars in the world and it would be nice if we didn't have to see it depart the Indian market for good.