Mahindra will own 51% in the new joint venture.
Ford like many other automakers, has faced a sharp decline in its domestic sales by 31.4% in August 2019. Only 5517 units were sold compared to 8042 units in the same month last year. While the auto industry slowdown is a factor, Ford has struggled to make a substantial mark in the Indian auto industry.
Ford will transfer a large share of its assets in India to Mahindra allowing the company to own a 51% share in the new partnership. Although, Ford is going to retain equal voting rights and board representation.
Ford will be the second prime player to exit India after Chevrolet when General Motors decided to scrap their $1 billion investment in India 2 years go. Ford’s 20 years of experience in the Indian market has nonetheless been in vain, just to achieve a market share of less than 3%. Ford had invested $2 billion in the domestic market, the financial burden of which is now going to be shared with Mahindra.
Ford may additionally sell 2 of its plants in Gujarat and Chennai. The company had spent $1 billion for its Gujarat plant’s conception back in March 2015. The other plant began its operation in 1995 from where the EcoSport and Endeavour models emerge from.
The venture may become official as early as next week. But, the agreement is still not final and may take a massive shift. The venture doesn’t include Ford’s global business services division or its plant in Sanand.
The world’s 4th-largest automobile market hasn’t proved to be remunerative for the company. Ford will leverage Mahindra’s reach for sales and service. This venture enables Mahindra to sell some Ford vehicles under its own name. Subsequently, Ford and Mahindra are jointly developing a mid-sized SUV for India to rival the Hyundai Creta, Kia Seltos, MG Hector, Tata Harrier and the Nissan Kicks.
Ford was one of the 1st automobile companies to enter India back in early 1990. However the increased competition and domination from price-conscious brands like Maruti Suzuki and Hyundai who focused more on fuel-efficiency, a vast network of repair shops and spare parts availability ultimately flourished in the market.
– Mahindra to have 51% stake in the venture
– Ford to sell 2 of its plants
– Joint development of a new mid-size SUV
Source – ThePrint.in