Ford may enter a joint venture with M&M ending a 25-year old solo ride that cost $2 billion: Report

  • American car maker Ford may form a partnership with Indian car maker M&M, Reuters said citing sources.
  • India's third-largest car maker M&M is likely to own 51% stake in the venture and Ford may own the rest.
  • The two companies came together for the first time in 2017 to build SUVs and electric cars.
  • Ford would add 14,000 employees, two plants to M&M and both companies had similar sales in 2018.
  • In 2018, Ford's India division swung to profit for the first time in eight years.
American car maker Ford's solo drive in India is likely to end. The company may form a joint venture (JV) with the Indian conglomerate, Mahindra & Mahindra, according to a report citing sources from news agency Reuters. Both companies have refused to confirm Reuters' report that said M&M will own 51% stake in the JV, while Ford will own the rest.

If this stake sale goes through, this will be a milestone in the history of the Dearborn, Michigan-based company that entered India nearly 25 years ago. "Since its entry in India in 1995, Ford has invested more than US$ 2 billion to expand its manufacturing facilities and sales & service footprint to meet the demand in one of the world's fastest-growing auto markets," according to its website.

M&M, on the other hand, is the country's third-largest passenger vehicle maker, whose automotive business spans from sports utility vehicles (SUV) to tractors and buses, from heavy engines to electric cars. The company bought over Korean peer Ssangyong in 2011 and an Italian graphic design firm in 2008.

However, the country's automobile industry has been reeling under pressure from slowing car sales in recent months.

What M&M gets...

Most importantly, in 2018, Ford's India division swung to profit for the first time in eight years. About 85% of the components are locally sourced.

Ford has integrated manufacturing facility at Maraimalai Nagar, near Chennai, produces its popular models like Ford EcoSport and Ford Endeavour. It also has, according to the company, a "$1 billion state-of-the-art integrated manufacturing facility in Sanand, Gujarat," which became operational in March 2015. M&M has 16 plants dotted across the country.

The annual installed manufacturing capacity is 610,000 engines and 440,000 vehicles. Total sales for the year-ended December 2018 were at 265,714 units, just marginally up from a year earlier. In the same time, M&M sold over 250,000 vehicles, including exports.

Ford has more than 376 sales and service outlets in 209 cities across India. It will also bring to the table 14,000 employees.

The synergies

Just like Ford, M&M's top-selling brands are SUVs and that segment is in a tight spot. While the demand is weak, emission norms are scheduled be tightened next year and that would make diesel cars, especially the gas-guzzling SUVs less attractive.

Coming together would reduce competition and ease the pressure on the business.

The two companies tied up in 2017 to build cars together and the first model is expected to be out in the financial year ending March 2020.

M&M on the other hand has been a pioneer in India's nascent electric car market, a growing space which Ford is absent from. The Mumbai-based company is planning to double its electric vehicle (EV) portfolio in three years. The current EV manufacturing capacity is 5,000 and the firm plans to increase it to 60,000-70,000 in a year.

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