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Ford and Indian automaker Mahindra are to sign a deal next week to form a joint venture in India, sources have told Reuters. The move will see the Detroit-based carmaker end most of its independent operations in the country.
The newswire reported in April that the two parties have for months been structuring a deal to create a new company, which will see Ford hold a 49% stake and Mahindra control 51%.
The unnamed sources add that under the deal, Ford will transfer most of its automotive assets and employees in India to the new company, but the US carmaker will retain an engine plant in Sanand, Gujarat. Ford’s two factories – in Chennai and Sanand – will be moved to the new JV. The total annual manufacturing capacity is 440,000 units.
Ford-brand cars will continue to be built and sold in India and exported by the new company, one of the sources said. A Ford spokeswoman did not comment directly on the JV deal, but said the company was engaged with Mahindra “to develop avenues of strategic cooperation that help us achieve commercial, manufacturing and business efficiencies.”
According to the report, by going the JV route, Ford is changing its long-time India strategy focused on running an independent operation. Over two decades, Ford has invested more than US$2 billion (RM8.4 billion) in India but has found limited success – its current market share is about 3%, while market leader Maruti Suzuki controls 50% of the pie.
Said to be under pressure from shareholders to deliver profits, Ford has been restructuring its businesses worldwide with an aim to save US$11 billion (RM46.1 billion) over the next couple of years.
In September 2017, Ford and Mahindra entered into an agreement to explore a strategic alliance that will focus on a number of key areas, including electrification and product development. They said that the partnership was to leverage the benefits of Ford’s global reach and expertise, and Mahindra’s scale in India and successful operating model.
The collaboration was also expected to strengthen Ford’s commitment to India and improve its reach within the country, while facilitating Mahindra’s expansion into emerging global markets. Other areas of potential cooperation include mobility programmes, connected vehicle projects and the exploration of sourcing and commercial efficiencies.
Of course, Ford is also now in bed with Volkswagen. The deal is that the German giant will provide use of its MEB electric vehicle platform to Ford while investing in Ford’s autonomous vehicle arm Argo AI.