Both the companies are looking to take their alliance a step further with an equity-based joint venture.
Ford has been claiming that the FY 2017 was one of the best it had in India in terms of finances but the following year wasn’t as good. Its actions too have been suggesting the same. We had earlier brought to your notice about how the company is cutting costs by slowing down its hiring process and is trying to save on opex by shifting to a smaller headquarter. But Ford doesn’t want to leave the Indian market and hence is planning an equity-based joint venture with the home-grown Indian manufacturer Mahindra.
The new formation between Mahindra and Ford isn’t an all-new alliance. It can be called as an evolution of their existing cooperation agreements in India which began in 1995, three years after which Ford started selling its vehicles here. If the talks go through, Mahindra will become a 51 percent stakeholder of Ford India which directly means a controlling share. The rest 49 percent will continue to be with Ford.
The new joint venture will allow both the companies to share their technologies, infrastructure and vehicle platforms with each other. This will not only reduce the costs but also allow for a sustainable and profitable business model. Talks about jointly developing electric cars have been on for some months now as India will see the beginning of an electric era from 2020.
The more than 2 billion dollars that Ford has pumped into India so far haven’t given them the desired results. It does produce driver oriented cars which have good driving dynamics but the same can’t be said about their fit and finish. The new alliance will allow thought sharing and joint gauging of the Indian market to make better products. Two intelligent minds working together is always better than one and this is a good time and opportunity for Mahindra and Ford to bolster their alliance.
The SUV market too is growing at a rapid pace in India and Ford has excellent expertise in producing such vehicles. A great example is the Ford Endeavour. Mahindra on the other hand currently has an all SUV portfolio in India and isn’t looking to change that anytime soon. Will we see a rebadged Mahindra XUV500 or a rebadged Endeavour in the future, who knows.
Ford Mahindra Joint Venture
– The manufacturers are looking to form an equity-based alliance
– Mahindra will hold 51 percent stake while Ford will own the rest
– Technology and product sharing along with de-risking the business is the aim
Source – ETAuto.com