Mahindra and Mahindra, Ford ink strategic pact; alliance to cover e-vehicles, product development

September 19, 2017
FE Bureau

Despite the majority of domestic-global player tie-ups in the auto sector failing and eventually breaking up, Mahindra & Mahindra (M&M) and US major Ford on Monday entered into a pact to explore a strategic alliance covering areas like product development, electric vehicles and distribution in India and abroad. Under the agreement, teams from both companies will collaborate and work together for up to three years to leverage the benefits of Ford’s global reach and expertise and M&M’s scale in India, the two companies said in a statement. “Any further strategic cooperation between the two companies will be decided at the end of that period,” they added.
This is the second time the two have entered into an alliance. In 1995 when Ford first entered India, it had a 50:50 joint venture with M&M under which the two produced a sedan called Escort. The joint venture was dissolved in 1998. M&M took a second shot in 2005 at manufacturing a car, the Logan, in a joint venture with French manufacturer Renault. This too broke down in 2010. Not only M&M, there are instances of other domestic players entering into tie-ups with global majors that did not work. The Tata-Fiat tie-up for manufacturing and sales and marketing is currently on only for the manufacturing part while the sales and marketing part has been dissolved.
Ashok Leyland’s tie-up with Nissan for making light commercial vehicles broke down, and recently the Tata Motors-Volkswagen technology-sharing pact got dissolved. Industry observers said that on paper such tie-ups look very attractive in terms of pooling of resources and infrastructure but in practice integrating two different cultures and sales policies gets hard, which is why most alliances do not work and need to be dissolved. Particular to the current alliance, it seems M&M is looking at tapping new technologies, especially for making electric vehicles. from Ford, while the latter may be keen to share the large sales and distribution network of M&M in the country. Ford has two manufacturing units in the country — at Chennai and Gujarat — but 40% of the capacity is idle. M&M may be able to use it in case it needs more capacity. Ford isn’t exactly doing well in the country — of a total monthly volumes of around 24,000, sales in domestic market is only around 6,000-7,000 while rest are exported.
The two companies said their alliance would look at areas of potential cooperation including “mobility programmes, connected vehicle projects, electrification and product development”. Besides, they will explore sourcing and commercial efficiencies, distribution within India, improving Ford’s reach within India, global emerging markets, and improving M&M’s reach outside India, the statement added. M&M managing director Pawan Goenka said, “Today’s announcement builds on the foundation laid through our past partnership with Ford and will open opportunities for both of us.” On his part, Ford executive vice-president and president of global markets Jim Farley said, “The memorandum of understanding we have signed today with Mahindra will allow us to work together to take advantage of the changes coming in the auto industry.”

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