Ford Likely To End Independent India Business With New Mahindra Deal

April 10,2019

According to Reuters, Ford Motor Co is likely to cease its independent operations in India and is in final phase of nearing a deal with Mahindra & Mahindra to form a new joint-venture company in India.

The Michigan-based Ford has invested more than $2 billion in India in last 2 decades but could manage a market share of just 3% in India, one of the world's fastest-growing car markets.
As per the deal being negotiated, Ford will form a new unit in India in which it will hold a 49% stake, while Mahindra will own 51%. The U.S. carmaker's Indian unit will transfer most of its current automotive business to the new entity, including its assets and employees. The deal is expected to close within 90 days, the sources said, adding the value of the transaction was not yet clear.
Ford has its own subsidiary for making and selling cars in India. It has partnered with Mahindra in 2017 for making new SUV and electric variants together. Although both the companies have declined to comment on the deal saying they do not comment on speculations but have added that the two companies would continue to work together as per their 2017 partnership arrangement.

Past few years have been hard for Ford and consequently company has initiated a restructuring drive across the world. The company hopes to save $11 billion over the next few years under this global restructuring drive. Subsequent to this drive it is planning to close its two assembly plants and an engine factory in Russia,
Ford sold close to 93,000 vehicles in India last fiscal year, a far cry from market leader Maruti Suzuki which commands a 51% market share and sold more than 1.7 million cars. As per the sources, Ford-Mahindra deal would lead to more affordable Ford cars in the country, as the company would not need to pay any royalty to its global parent, as the Indian unit has to now.

India has been a major growth area for global car manufacturers but growth has slowed of late - car sales grew by 3% to just over 3.3 million units in the last fiscal year to March 31, compared with 8% the previous year. The Indian market remains the top priority for all global automakers and the market size is poised to become the world's third-largest car market by 2023 with sales of over 5 million cars annually.

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Author - Sree Raghuma G