Indian auto conglomerate Mahindra & Mahindra Ltd and Detroit-based Ford Motor Co. on Monday said they were exploring a strategic alliance to leverage each other’s strengths to address rapidly emerging challenges in the global automobile industry.
The agreement between the two companies will allow them to combine their mutual strengths during a period of unprecedented transformation in the automotive industry, the companies said in a joint statement.
“Teams from both companies will collaborate and work together for a period of up to three years. Any further strategic cooperation between the two companies will be decided at the end of that period,” the statement added.
The areas of potential cooperation include mobility programmes, connected vehicle projects, electrification, product development, sourcing and commercial efficiencies, distribution within India to improve Ford’s reach and into global emerging markets to scale up Mahindra’s network.
At first glance, the partnership seems to be an equal one, with the Indian firm gaining from Ford’s advanced technologies and global network; the Bill Ford-led American automaker will get a stronger and bigger footprint in the lucrative Indian market, which is expected to become the second-largest passenger vehicle market by 2026 with annual volume of 13.4 million units per year (if the local economy grows at an annual pace of 7.5%), according to the Indian government.
To be sure, Mahindra was Ford’s first partner in India. Mahindra Ford, as the firm was called, started making the Ford Escort sedan in India in 1995. In 1998, the company became Ford India Pvt. Ltd.
The automobile industry, both in India and globally, has changed a great deal since then. While Ford is still unprofitable in India and Mahindra has not grown significantly overseas, concepts such as shared mobility, autonomous cars and electric vehicles are threatening to disrupt the sector, forcing yesterday’s giants in the space to cobble together partnerships to take on challenges from Uber Technologies Inc., Apple Inc. and Google Inc.
Today, the most admired automaker in the world is, arguably, neither Nissan Motor Co. Ltd nor Toyota Motor Corp., but electric vehicle maker Tesla Inc.
“…Given these changes, we see the need to anticipate new market trends, explore alternatives and look for ways to collaborate even as we compete and build powerful synergies that will allow rapid exploitation of the exciting new opportunities,” Pawan Goenka, managing director, Mahindra, said in the statement.
For Ford, it is about gaining local scale and access to Mahindra’s affordable electric vehicle technology.
“The enormous growth potential in the utility market and the growing importance of mobility and affordable battery electric vehicles are all aligned with our strategic priorities,” Jim Farley, executive vice-president and president for global markets, Ford Motor, said in the statement.
On Monday, Mahindra rose 0.14% to Rs1,294.85 on BSE while the benchmark Sensex gained 0.47%.