Ford Motor is set to transfer most of its assets in India to a joint venture with Mahindra & Mahindra after failing to make meaningful inroads for more than two decades in the world’s fourth-largest automobile market, people with knowledge of the matter said.
Mahindra, one of India’s largest automakers, will own 51 percent of the new entity, said the people, who asked not to be identified discussing the confidential plan. Ford will get equal voting rights and board representation, one of the people said.
The venture, to be announced as soon as next week, does not include Ford’s global business services division or an export-focused engine plant in Sanand.
Ford’s compensation is likely to be far below the $2 billion it has poured into India, only to achieve market share of less than 3 percent. The deal keeps Ford in the heavily populated market while letting it share the financial burden with Mahindra. Ford CEO Jim Hackett is leading an $11 billion restructuring and paring money-losing overseas operations.
Global automakers have had a tough time making inroads into India, which is dominated by Suzuki’s cheap, fuel efficient vehicles. General Motors scrapped a $1 billion investment in India two years ago and stopped selling Chevrolet models there. The market as a whole faces challenges, with sales contracting for the past 10 months, forcing the industry to cut production and jobs.
A final agreement between Ford and Mahindra has not been reached and the discussions could still fall apart, the people said. Reuters reported some elements of the venture in April.
As envisioned, the new entity would hold most of Ford’s assets in India, including the two car plants it owns in the country. Ford was one of the first automobile companies to enter India when it liberalized the economy in the early 1990s. Ford first entered India in 1926 but shut down that operation in the 1950s.
“Ford remains committed to growing its customer base and product portfolio in the world’s fourth-largest automobile market, and will continue to make in India, for India and the world,” Lori Arpin, a Ford spokeswoman said in a statement while declining to discuss specifics. Mahindra declined to comment.
If completed, the deal would allow Mahindra to sell some Ford vehicles in developing markets under its own brand, the people said. Ford and Mahindra also are jointly developing a midsize SUV for India.
Back in 2012, Ford had aimed to make the South Asian nation one of its three largest markets by 2020. Most global automakers have failed to win over buyers in the notoriously price-conscious market led by Suzuki’s local unit, Maruti Suzuki India, with its strong network of dealers and ubiquitous repair shops.