01 Oct 2019
Indian joint venture shows Ford’s new emerging market strategy more clearly, says GlobalData
Following the news that Ford is to hand the bulk of its Indian operations to a new joint venture (JV) with Mahindra;
Graeme Roberts, Automotive Editor at GlobalData, a leading data and analytics company, offers his view:
“Today’s announcement is a clear sign of the direction Ford will take with emerging markets in future. The company clearly sees JVs with seasoned local partners as its path to the success that has, so far, eluded its own operations in markets such as Russia and India.
“Ford announced last January it was putting its loss-making Russian business under review as part of a broader restructuring of its unprofitable Europe region, where it had previously retrenched with the closure or sale of all car-making units in the UK and a loss-making car assembly plant in Belgium. In March 2019, it decided to end the Russian passenger car making JV with Sollers to focus on the still-profitable Transit commercial van JV. Although the deal announced today for India with Mahindra is more comprehensive than the restructuring in Russia, we can now see clearly how Ford will in future refocus in profit-challenged countries, particularly emerging markets.
“In this case, Mahindra, a rising star, will be the controlling partner with 51%, and the pair will collaborate to develop, market and distribute Ford-brand vehicles in India and both Ford and Mahindra-brand vehicles in high-growth emerging markets worldwide.
“Ford will transfer its India operations to the JV, including personnel and assembly plants in Chennai and Sanand, but retain the engine plant in Sanand plus back office operations such as its Global Business Services unit, Ford Credit and smart mobility. Mahindra will benefit from the much greater economies of scale that the JV will leverage across the automotive value chain, including optimised sourcing, product development, use of relevant technologies and a much larger global network.
“If the two companies can avoid the conflicts of strategy and direction that sometimes negatively impacts such JVs, this new deal should be a win-win for both automakers as the global auto industry enters very challenging times.”