Just months after General Motors decided to pull out of the Indian automotive market Ford Motor Co. is hoping to kick-start its struggling operations there by teaming up with local pickup and SUV manufacturer Mahindra & Mahindra.
The strategic alliance marks the second time Ford and Mahindra have tried to team up. They ended a three-year venture focused on producing small sedans in 2005. The new partnership could prove critical for Ford, which had been considering exiting India despite the fact that many analysts believe the market could eventually be nearly as large as China’s.
“Ford is committed to India and this alliance can help us deliver the best vehicles and services to customers while profitably growing in the world’s fifth largest vehicle market,” said Jim Farley, Ford executive vice president and president of Global Markets.
As before, the new alliance has a three-year sunset clause which suggests that Ford remains concerned about the long-term prospects of remaining in India. “Any further strategic cooperation between the two companies will be decided at the end of that period,” the two carmakers said in a joint statement.
Ford has been in and out of India over the decades, most recently entering it in the mid-1990s as the country opened up for foreign investment, noted the Bloomberg news service. But the Detroit automaker has struggled to gain traction in market dominated by Japan’s Suzuki which holds a 47% share. Hyundai is the second-largest brand, with a nearly 17% share. Mahindra, which focuses on pickups and SUVs, has just under an 8% market share.
(Ford freshens up little EcoSport ahead of U.S. arrival. For the story, Click Here.)
The new alliance is intended to let Ford and Mahindra reduce costs by working together on product developing, and by sharing parts and components sourcing. They also plan to work together to address some of the key trends promising to reshape the auto industry, including mobility programs, connected vehicle projects and vehicle electrification.
The venture also should help increase Ford’s distribution channels in India, addressing one of the maker’s toughest challenges cracking into a market of around 1 billion potential drivers. Mahindra, meanwhile, appears to be looking to benefit from Ford’s global reach by expanding its markets overseas.
While the initial targets appear to be other emerging markets, it is unclear if Mahindra might also try to use the new alliance to help it finally crack into the U.S. The Indian company had started setting up a distribution network in the States early in this decade, and was even reported to be considering an American assembly line. It ultimately scrapped any plans.
Noting that the auto industry is undergoing a period of massive change, Mahindra Managing Director Pawan Geonka said “We see the need to anticipate new market trends, explore alternatives and look for ways to collaborate.” The Ford announcement “builds on the foundation laid through our past partnership with Ford and will open opportunities for both of us.”
(Click Here for more about GM leaving markets. )
Mahindra & Mahindra is a subsidiary of the $19 billion Mahindra Group which produces agricultural and energy products, among other things, as well as automobiles.
The announcement follows GM’s May decision to abandon the Indian automotive market after years of struggle. The largest of the U.S. automakers will retain its manufacturing base there but direct production to other markets.
For its part, Ford CEO Mark Fields was considering pulling out of India before he was ousted in May. It was unclear what his successor, Jim Hackett, might do, the former Steelcase CEO launching a 100-day review of Ford’s strategies and ventures.
Ford not only hopes to expand its sales in India but, like GM, use its plants there as an export base. It is set to start shipping the small, EcoSport SUV to the U.S. next year. It will become the first Indian-made vehicle sold in the States.
(To see more how Indian automakers are trying to get into the U.S. market, Click Here.)
Ford has struggled in India for a number of years, its sales there slipping by 6% since the beginning of 2017. While the market is expected to push past the U.S. by the end of this decade, demand largely centers around small, low-volume products like Ford’s EcoSport and Kuga models, making it difficult to turn a profit there.