Mahindra and Ford ink JV, target profitable growth in India and emerging markets

Mahindra & Mahindra and Ford Motor Company have signed a definitive agreement to create a joint venture that will develop, market and distribute Ford brand vehicles in India, and Ford brand and Mahindra brand vehicles in high-growth emerging markets worldwide.

The JV will see Mahindra having the 51 percent controlling stake and Ford owning a 49 percent stake. Ford will transfer its India operations to the JV, 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 JV is the next step in the strategic alliance forged between Ford and Mahindra in September 2017 and is expected to be operational by mid-2020, subject to regulatory approvals. It will be operationally managed by Mahindra, and its governance will be equally composed of representatives of Mahindra and Ford.

The JV will be responsible for growing the Ford brand in India and exporting its products to Ford entities globally. While Ford-branded vehicles will be distributed through the current Ford India dealer network, Mahindra will operate its own independent dealer network in India.

What the JV aims to achieve
- Strengthen the product portfolio
- Synergies in sourcing
- Synergies in manufacturing
- Operational efficiency
- Strengthen the Ford channel in India
- Increasing exports from India

What Ford brings to the JV table is its technology capability, maturity in product development, global sourcing global market reach and knowhow. Mahindra & Mahindra's strengths are an emerging market business model, integrated PD infrastructure in India; strong India sourcing and India market knowhow.

“Mahindra and Ford coming together is a testament to the long history of cooperation and mutual respect between the two companies. Our combined strengths – Mahindra’s expertise in value-focused engineering and its successful operating model, and Ford’s technical expertise, global reach and access to future technology – are a potent recipe for success. At its core, the partnership will be driven by the shared values of both companies, which are focused on caring for our customers, associates and our communities,” said Anand Mahindra, chairman, Mahindra Group.

“Ford and Mahindra have a long history of working together, and we are proud to partner with them to grow the Ford brand in India. We remain deeply committed to our employees, dealers and suppliers, and this new era of collaboration will allow us to deliver more vehicles to consumers in this important market,” said Bill Ford, executive chairman, Ford Motor Company.

“At Ford, our purpose for 116 years has always been to drive human progress, and that won’t change. But to continue to do that, we need to evolve with new and faster ways of not only delighting our customers around the world but also solving their very different needs. Strong alliances like this play a crucial role in assuring we continue to achieve our vision while at the same time staying competitive and delivering value to our global stakeholders,” said Jim Hackett, Ford president and CEO. 

Seven new models planned
Emerging from this JV will be seven new models, including three new utility vehicles from Ford, beginning with the C-SUV. The new C-SUV will be built by Mahindra, and will be a derivative of the W601 – essentially the next-generation XUV500. The W601’s platform will be developed jointly by Mahindra, SsangYong and Ford and the vehicle will be positioned above the Hyundai Creta. This Ford C-SUV will be powered by Mahindra’s next-gen, BS VI-compliant 2.0-litre diesel engine. And while it will share most of its core components with the Mahindra W601, Ford’s version will have an all-new exterior, a new interior and even a slightly different (and improved) chassis. “It will drive like a Ford,” according to insiders.

The remaining two UVs are yet to be signed off, but both will be built by Ford, with one of them expected to be a brand-new compact SUV. Known internally as the B-SUV, the joint venture will either use the SsangYong Tivoli (Mahindra’s S201) or Ford’s own Vitara Brezza rival (codename: B763), that is currently being developed. The Ford and Mahindra/SsangYong SUVs will however wear different 'top hats' and will look quite different.

Electric vehicles are also on the agenda for this new joint venture, with Mahindra having previously confirmed it is currently working on a Mahindra-badged electric version of the Ford Aspire, which is slated for a 2021 launch. There will also be collaboration and sharing of powertrains starting with the Ford EcoSport that will feature Mahindra’s 1.2-litre turbo-petrol engine in place of the 1.0-litre EcoBoost in 2020; the latter unit will be phased out prior to the roll-out of BS6 norms. 

Targeting economies of scale across the value chain
Driving greater economies of scale across the automotive value chain including sourcing, product development and access to relevant technologies, the joint venture is expected to achieve enhanced efficiencies to strengthen the Ford brand in India. In addition, the joint venture will be a catalyst for growth for the Ford and Mahindra brands in emerging markets, which are growing at double the rate of the global industry.

The joint venture will use the Ford brand distribution network in emerging markets to extend support for export of Mahindra products, in addition to Ford branded vehicles. Exports today form about 7 percent of Mahindra’s auto business revenues and its products are exported to South Africa, Nepal, Bangladesh, Sri Lanka and Chile, among other nations and areas.

“Emerging economies including India are expected to account for one in three future vehicle sales,” said Dr. Pawan Goenka, managing director, Mahindra & Mahindra. “The joint venture will have a distinct product portfolio with shared platforms and powertrains, the newest technology, high quality and engineering standards from both Mahindra and Ford, at optimized costs. This winning combination will enable the joint venture to successfully position its vehicles in India, as well as unlock the potential of other highly competitive emerging markets”.

“The creation of this joint venture is a pivotal moment in both our companies’ histories. Strong alliances such as this play a crucial role for Ford to compete profitably in the high-volume, affordable vehicle segments so popular with our diverse customer base. By combining our respective talents, we will offer more vehicles to more customers in more places than ever before and deliver profitable growth to both Ford and Mahindra,” said Jim Farley, president of Ford New Businesses, Technology & Strategy.

Ford’s newly established International Markets Group (IMG) business unit will play a key role in the process. IMG brings together 100 high-potential, emerged and emerging markets including India Australia, ASEAN, Middle East, Africa and Russia. In addition to the established Ford Ranger and U.S. import businesses in IMG, the formation of this joint venture will add to IMG’s portfolio vehicles specifically tailored for emerging markets, and it places India very much at the centre of Ford’s strategy for IMG.

Mahindra, which has been the UV leader for the past seven decades and also the pioneer of electric mobility in India, also owns a majority stake in Ssangyong Motor Company in Korea. The company has entered into the shared mobility space with investments in ridesharing platforms in the United States.

Ford, which was among the first global automakers to enter India in 1995, ranks among the leading exporters of vehicles from the country. Ford India manufactures and exports vehicles and engines from its facilities in Chennai, Tamil Nadu and Sanand, Gujarat.

India is the third-largest Ford employee base globally, with more than 14,000 people working across the Ford India and Global Business Services operations in Delhi, Chennai and Coimbatore. Under the new structure, Ford will continue its support for all corporate social responsibility initiatives.