Ford-Mahindra JV called off – What does it mean?

Now, that Ford and Mahindra have amicably agreed not to form a Joint Venture (JV), what does it mean for the future of both brands in the Indian market?

Ford and Mahindra have officially announced that their proposed joint venture will not go through. The announcement follows the passing of the December 31st 'longstop,' or expiration date of a definitive agreement the organizations entered into in October 2019. 'Fundamental changes in global economic & business conditions – caused, in part, by the global pandemic – over the past 15 months' is cited as the key reason to call off the JV.

Background

On 1st October 2019, both Ford and Mahindra had signed on to a Joint Venture (JV) that was valued at $275 million (₹1,925 crores approx.). Aimed at the development, marketing, and distribution of Ford vehicles in India and some Ford and Mahindra products in high-growth international markets, the JV, as per the original timeline, was expected to take off by mid-2020. This was all proposed before the pandemic though. As per the agreement, Mahindra would have a 51 per cent controlling stake in the JV while Ford would own the remaining 49 per cent stake.

The impact on both brands

Ford in its official statement has said that 'its independent operations in India will continue as is. The company is actively evaluating its businesses around the world, including in India, making choices and allocating capital in ways that advance Ford’s plan to achieve an 8% company adjusted EBIT margin and generate consistently strong adjusted free cash flow.' How long can Ford continue its independent operations in India though is the key question here.

Likewise, Mahindra reiterated its commitment to its future product line-up by stating, 'This decision will not have any impact on the company’s product plan. It is well-positioned in its core true SUV DNA and product platforms with a strong focus on financial performance.'

Though the following is yet to be confirmed, the latest speculation suggests that Ford will eventually turn to Mahindra for a contract manufacturing agreement to build its upcoming C-SUV (expected to arrive in early 2022) at Mahindra's Chakan plant, that will be based on the new XUV500 (expected to be launched in the first half of 2021). While the Ford C-SUV is also likely to mirror the engine options of the new XUV500, a similar powertrain sharing can also be expected between the updated Ford EcoSport (arriving sometime in 2021) and the Mahindra XUV300 (expected to receive a mStallion petrol motor).

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