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Ford ends its solo play in India after 2 decades; forms JV with Mahindra amid auto slump

The Ford-Mahindra deal is valued at Rs 1,925 crore; both companies have transferred a debt of Rs 636 crore in the JV, besides contributing an equity of Rs 1,289 crore

twitter-logo Nevin John   New Delhi     Last Updated: October 2, 2019  | 11:34 IST
Ford ends its solo play in India after 2 decades; forms JV with Mahindra amid auto slump
The JV will be responsible for growing the Ford brand in India.

Ford Motor Co has ended its solo play in India after two-decades-long unsuccessful efforts to make inroads in the fast-growing Indian passenger car market. It formed a joint venture with Mahindra & Mahindra to develop, market and distribute the vehicles of the US giant in the country. Mahindra will hold a majority 51 per cent stake in the JV and will hold the right to appoint the chairman. The deal is valued at Rs 1,925 crore. Both companies have transferred a debt of Rs 636 crore in the JV, besides contributing an equity of Rs 1,289 crore.

Anand Mahindra, Chairman of M&M, said the size of JV company and its skills will be the synergy benefits. Sourcing scale of M&M will go up by 1.3 times, while that of Ford will increase by 3 times, he said. "Ford will transfer its India operations to the joint venture, including its personnel and assembly plants in Chennai and Sanand. Ford will retain the Ford engine plant operations in Sanand as well as the Global Business Services unit, Ford Credit and Ford Smart Mobility," the companies said.

Ford will take $800-$900 million impairment charges on its books for the losses it made in India. Ford has made some impacts in India with models like Ikon, Fiesta and Ecosport, but failed to continue the momentum with new launches and fell short in its competition with Maruti Suzuki and Hyundai. The JV will be operationally managed by Mahindra, and its governance will be equally composed of representatives of Mahindra and Ford. Both the companies plan to introduce three new vehicles under the Ford brand, beginning with a midsize SUV that will share underpinnings with the Indian partner. "The JV will produce vehicles of both the brands and maintain its brand identities separately," said Pawan Goenka, Managing Director of M&M.

The JV will have a 14 per cent market share, considering the combined sales of both the companies. Both the giants decided to come together at a time India's passenger vehicle market is witnessing a severe reduction in sales. Ford had first set up shop in India in 1926 but shut down that operation in the 1950s. It re-entered the market post liberalisation in the 90s. Its US rival General Motors Co pulled out of India two years ago, scrapping $1 billion worth of investment.

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