Ford and Mahindra Call Off their Joint Venture; What are the Implications?

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Back in October 2019, Mahindra & Mahindra Ltd. and Ford Motor Company announced their Joint Venture (JV) in India, wherein M&M would hold 51 % controlling stake while Ford Motor Company would hold the remainder of 49 % controlling stake. Now in a surprise announcement, the companies have called off their venture which was supposed to jointly develop products for the local as well as international markets.

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Ford Motor’s portfolio in India includes the Ecosport, Endeavour, Freestyle and the Aspire. Together, they account for a very marginal market share which hovers around 2 % in India.

M&M and Ford logos

This was a key reason why Ford set up a JV with a local manufacturer, M&M in the first place. The main motive was to source the leverage from a local player, understanding the market from a local standpoint and offering its state-of-the-art engineering and global reach and facilities to help M&M expand its horizon.

As it stands, after the call-off, Ford will continue on its own in the Indian market. One reason that was much highlighted for the JV call-off was what they said “reassess their respective capital allocation priorities” which means they have to better plan their investments, have a better eye on the costs and look into and reassess their financial situation.

Both Companies mutually mentioned that the action was driven by a fundamental change in global economic and business conditions due to the unforeseen pandemic circumstances which effectively means, in the words on Dr Pawan Goenka, MD, Mahindra & Mahindra – “In the current scenario, the investments would have been significantly more than what was envisioned. Therefore, it did not make any business sense for either partner.”

Ford’s XUV 500 based CSUV render

Render credits: Auto harsh9

Not all the products are axed then?

This call-off has not derailed some of their mutual plans. Ford’s SUV which is based on the new-gen Mahindra XUV 500 is still on track. It will share the platform and the engines, the 2.0L mStallion turbo petrol and a 2.2L mHawk diesel with the XUV. Mahindra will launch the all-new XUV 500 sometime in calendar Q1, 2021, i.e between January and March 2021 while Ford will launch its version some 9-10 months after the XUV’s launch which means an early 2022 launch.

Mahindra’s mStallion Petrol engines

The Ford EcoSport would also get 1.2L mStallion turbo petrol engine from M&M in place of its 1.0L turbo petrol mill. Apart from that, there were speculations of them jointly developing an MPV and sharing EV technology which won’t happen now, it seems.

Also read: Ford Endeavour Gets Less Premium Than Before

The call-off for Ford means it has to survive independently in the Indian market without a local aid, while it will be unable to leverage M&M cost-effective production for better returns overseas as well.  It has 2 facilities in India, one each in Chennai and Gujarat and could focus more on exports rather than domestic sales, given its market share. In the worst case, it could follow GM’s suit and exit India. M&M, on the other hand, will lose out on Ford’s technology, reach and position in prospective global markets where M&M was eyeing an expansion. The pandemic has set it off the foot and its directly looking to save costs and money which explains why it’s all set to sell Ssangyong’s 70% stake to an investor, a company it bought a decade ago.

 

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