American automaker Ford is reportedly planning to cease its independent operations in India in light of a possible deal with Mahindra & Mahindra to form a new joint venture.
The deal would make Ford the second company to pare back its interests in India. At the end of 2017, General Motors announced that it will downsize its Indian operations and stop selling cars locally, dealing a blow to Prime Minister Narendra Modi’s strategy to encourage domestic manufacturing.
In its two decades of operations, Ford Motor Co. has invested more than $2 billion in the Indian market but has constantly struggled. Following years of cracking the code to excel in the Indian automotive landscape, Ford currently has a market share of just three percent.
In 2017, Ford formed a strategic alliance with Mahindra which primarily aimed at building new cars together, including sport-utility vehicles and electric variants.
Reuters reported that the American manufacturer will form a new unit in India in which it will hold a 49 percent stake, while Mahindra will own 51 percent. The deal is reportedly under negotiations, the two sources said. If the deal goes through, Ford’s Indian unit will transfer most of its current automotive business to the new entity.
“It’s like a partial exit (for Ford from India),” the source said.
Sources suggest that the deal will close within the next 90 days, adding the value of the transaction was not yet clear. While Ford declined to comment on the deal, it said that both the companies continue to work together “to develop avenues of strategic cooperation that help us achieve commercial, manufacturing and business efficiencies”.
Mahindra too declined to comment on the deal suggesting that it was “working together in identified areas” with Ford after a 2017 partnership arrangement, and “will announce further definitive agreements as we progress on some of the other areas.”
In 2017, Ford formed a strategic alliance with Mahindra which primarily aimed at building new cars together, including sport-utility vehicles and electric variants. The American auto giant has been globally restructuring its businesses with an aim to save $11 billion over the next few years.