American Ford Motor Company and homegrown vehicle-maker Mahindra and Mahindra have said that they will launch a strategic alliance to counter challenges posed by fast-changing technology and global competition.
The agreement, which builds on a former alliance that was unwound in 2005, is another sign that Ford Chief Executive Jim Hackett, who took over in May, has begun to steer the automaker in a different direction.
Ford and other global automakers are under pressure as policymakers demand that they shift their product-lines entirely to electric vehicles over the next two to three decades. One potential benefit to Ford of a partnership with Mahindra is access to lower-cost electric vehicle designs and local suppliers it needs to compete in markets such as India.
Ford has less than 3% market share in India, although its exports from the country are expanding rapidly. Near term, Mahindra could help Ford lower its distribution costs or send production work to Ford's Indian plants.
At the same time, automakers such as Mahindra, with ambitions to grow, need access to technology, strong brands and global distribution networks that established companies like Ford can offer.
Hackett's decision to no longer go it alone in India follows a move to hire an outsider to run Ford's operations in China, and shift production of the Ford Focus for the US market to China, instead of Mexico as previously planned. Hackett has also launched reviews of the company's luxury brand strategy and self-driving car development.
Ford and Mahindra said in a joint announcement that they would seek ways to collaborate on a wide range of projects for up to three years. Financial terms were not disclosed.
Ford President (Global Markets) Jim Farley and Ford's head of Asia Pacific operations, Peter Fleet, said that teams from the companies will start meeting soon to discuss ways to benefit in the short and medium term.
"We are focused on the now and near with this initiative. We want to work on the opportunities that are right in front of us," Farley said.
In the shorter term, Ford and Mahindra suggested that they could benefit from collaborating on distribution of vehicles in India, pooling, purchasing and collaborating on forays into ride services.
Ford and Mahindra had a partnership during the 1990s and early 2000s that involved cross share-holdings.
Ford does not break out results from India, but the company reported a pre-tax loss for the second quarter in Asian and Pacific markets outside of China.
Longer-term projects could include sharing technology or development efforts for electric vehicles, the companies said. For Ford, the Mahindra deal points to a new strategy for dealing with demands from policymakers in many major markets to phase out petroleum-fueled vehicles in favour of electric cars and trucks.
Ford, like global rivals, faces a challenge because electric vehicles engineered for the US or Europe are too expensive for Indian or Chinese customers. Policymakers in China and India, as well as some European countries, have signaled that they want the industry to phase out diesel and gasoline vehicles over the next two to three decades.
Fast-growing markets
By allying with Mahindra, Ford can work with the leader in the emerging low-cost electric vehicle market in India. In China, Ford said last month that it would pursue a joint venture with Chinese low-cost electric vehicle maker Zotye.
"We will certainly be introducing the companies," Fleet said.
India is one of the world's fastest-growing car markets. Getting more companies to manufacture in India -- both for its own market and for export -- is critical for the Prime Minister Narendra Modi government, which needs to create millions of new jobs each year as the workforce expands.
However, global carmakers like Fiat Chrysler, Volkswagen and General Motors have struggled in India, where nimbler rivals such as Maruti Suzuki and Hyundai Motor have cornered roughly two-thirds of the market.
Turbulence in the Indian economy, and shifts in government policy on vehicle taxes and regulation have further complicated the situation for global automakers. Earlier in September, for example, The Union Cabinet approved an increase in the maximum levy on luxury cars and SUVs to as much as 25% -- less than two months after deciding on a lower rate of 15% as part of the new nationwide goods and services tax.
In May, General Motors said that it would stop selling cars in India at the end of this year.
Mahindra and Ford said their prospective alliance would give Ford access to Mahindra's distribution network in India while Mahindra would benefit from Ford's market reach in other developing economies.
The US company has already invested more than $2 billion in India, where it has the second-highest number of Ford employees of any country, company executives said.
Ford is among the top exporters of cars from India and manufactures and exports vehicles and engines from its plants in Chennai and Sanand in Gujarat.
Published 24 September 2017, 17:12 IST