Mahindra and Mahindra (M&M) and US-automaker Ford Motor Company announced on Friday that they will not complete a previously announced automotive joint venture between their companies. The action followed passing of the December 31, “longstop”, or expiration, date of a definitive agreement the organisations entered into in October 2019.
Speaking to the media about the development, Pawan Goenka, managing director, Mahindra & Mahindra, said, “Given the fundamental changes in the global economic and business conditions, caused in part by the pandemic, both partners decided that we should not extend the date of the business transfer agreement, and therefore as of midnight business transfer agreement expired and there will be no further discussion that will happen on the JV between Mahindra and Ford.”
He said the changes influenced separate decisions by Ford and Mahindra to reassess their respective capital allocation priorities.
Giving up majority control in its India operations, Ford was said to transfer these to a joint venture formed with M&M. While M&M was supposed to own a 51% controlling stake in the JV valued at $275 million or Rs 1,925 crore, Ford was to hold 49%.
M&M and Ford had signed a definitive 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 around the world.
Mahindra had said that it would invest Rs 1,400 crore in the JV, but the number would have been much higher if it would have gone ahead with the investment, based on the demand, as this JV was also supposed to manufacture and export globally. Anish Shah, deputy managing director and Group CFO, M&M, said, “We will continue to look at opportunities to collaborate together, but not go ahead with the JV as announced.”
However, Mahindra reiterated that this decision will not have any impact on its product plan. The company management said it will focus resources on and build a strong brand and capability to deliver high-quality top-notch SUV portfolio, which is based on EVs.
Rajesh Jejurikar, executive director (auto and farm division), M&M said, that the SUV segment will be in focus, and the company plans to launch two cars on all new platforms this year, with XUV500 and Scorpio also in the pipeline.
“We will be focusing on renewing the brand, strengthening our engagement with communities leveraging Mahindra adventure and working to make our brand more aspirational with higher engagement and greater affinity,” he said. He added that in the short term the company will focus on markets similar to India and will not try to build an international presence beyond these.
Get live Stock Prices from BSE, NSE, US Market and latest NAV, portfolio of Mutual Funds, Check out latest IPO News, Best Performing IPOs, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.