Ford forms JV with Mahindra for India business

The joint venture company is valued at $275 million and will develop, market and distribute Ford branded vehicles. Reuters Photo

Ford Motor Co and Mahindra & Mahindra will form a joint venture company in India valued at $275 million that will develop, market and distribute Ford branded vehicles in the country, the two companies said on Tuesday.

The two companies have for months been negotiating the deal, which will see Ford hold a 49% stake in the new entity, while Indian rival Mahindra will own 51%, Reuters reported in April.

By shifting to a joint venture, Ford is changing its India strategy where it has long run an independent operation. India's autos market is dominated by Asian automakers like Suzuki Motor Corp and Hyundai Motor Co.

As part of the agreement, M&M will acquire 51 per cent stake in a wholly-owned arm of the US auto major -- Ardour Automotive Private Ltd, presently a wholly-owned subsidiary of Ford Motor Company Inc, USA for around Rs 657 crore, the Indian firm said in a regulatory filing.

The balance 49 per cent equity shareholding in Ardour will be held by FMC and/ or any of its affiliates, it added.

M&M said it is committed to fund in the aggregate, for acquiring 51 per cent stake and for the future operations of the company, an amount not exceeding Rs 1,400 crore -- which includes the likely investment of about Rs 657 crores for 51 per cent in the JV.

The new venture will acquire the automotive business of Ford India Pvt Ltd (FIPL), a wholly-owned subsidiary of FMC, and has been engaged in the automotive business in India since 1995.

The automotive business to be acquired includes vehicle manufacturing plants of Ford India at Chennai and Sanand.

The acquisition will, however, exclude the separate powertrain facility in Sanand, which is essentially used for FMC's global markets, and the powertrain division of FIPL would not form part of the deal.

"Our combined strengths – Mahindra’s expertise in value-focused engineering and its successful operating model, and Ford’s technical expertise, global reach and access to future technology – are a potent recipe for success," said Anand Mahindra, Chairman, Mahindra Group.

Ford India's automotive business had posted revenue of Rs 26,324 crore in the year ended March 31, 2019. It was at Rs 25,010 crore in FY18 and Rs 22,103 crore in FY17.

The joint venture expects to introduce three new utility vehicles under the Ford brand, beginning with a new mid-size sports utility vehicle that will have a common Mahindra product platform and powertrain.

Another area of focus for the joint venture will be electric vehicles. Ford and Mahindra will collaborate to develop vehicles to support the growth of sustainable mobility across emerging markets.

The completion of the transaction is expected to take place by mid of 2020.

Ford and M&M had in September 2017 inked a pact to explore a strategic alliance covering areas like product development, electric vehicles and distribution in India and emerging markets.

Last year the two partners have agreed to develop new SUVs, a small electric vehicle and connected car solutions besides supply of Mahindra powertrains to extend Ford's product range as part of several initiatives.

Earlier this year, the two partners had signed a definitive agreement to co-develop a mid-sized SUV for India and other emerging markets

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