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Why Mahindra & Mahindra, Ford Motor Co teaming up for mobility solutions makes sense

New Delhi: The surprise announcement of a collaboration between Mahindra & Mahindra and Ford Motor Company could signal not only growing ambitions of the Indian company in overseas markets but also an abrupt U-turn by Ford on its India plans. M&M and Ford have agreed to explore a strategic alliance, designed to leverage the benefits of Ford’s global reach and expertise and Mahindra’s scale in India and successful operating model. Remember, the two companies were partners earlier before parting ways. So this would be a second coming.

In a statement, the two potential partners have said “The agreement between the two companies will allow each to leverage their mutual strengths during a period of unprecedented transformation in the global automotive industry. The areas of potential cooperation include: Mobility programs, Connected vehicle projects, Electrification, Product development, Sourcing and commercial efficiencies, Distribution within India, improving Ford’s reach within India and improving Mahindra’s reach outside India.”

 Why Mahindra & Mahindra, Ford Motor Co teaming up for mobility solutions makes sense

Reuters

Ford’s renewed optimism on India is welcome. Remember, compatriot General Motors stopped selling vehicles here last year, after years of struggling in one of the world’s fastest growing markets, unable to compete with Goliaths. Market leader Maruti Suzuki India sells almost every second car in the domestic market; Maruti, Hyundai Motor India and Tata Motors together control over two-thirds of the market, leaving slim pickings for all other car makers. For Ford to survive in this market, a partnership with a homegrown player would perhaps be the best course of action.

Just like GM, Ford too had put India business on watch under its previous leadership but when the current CEO Jim Hackett took over earlier this year, he started with a 100-day review of Ford’s business in its entirety. So the rethink on India’s utility in Ford’s global scheme of things probably forms a large part of this 100-day gameplan and the push may well be to make Ford relevant again in the Indian market.

Why Ford needs to slog in India is quite obvious. Its market share after decades of presence is still well short of even the 5 percent mark, the last product to set the markets on fire was the Figo and now, with the global push towards vehicles which will eschew fossil fuels, Ford (like other auto makers) needs to reorient its strategy from scratch. Mahindra & Mahindra has not only steadily expanded its passenger vehicle business, the company is also a pioneer of sorts in developing and testing vehicles which operate on alternate fuel technologies.

Almost a decade earlier, M&M was perhaps the first company in India to indigenously develop hybrid models for its best seller Scorpio.

This, when other auto makers in India were still pooh-poohing any need for vehicles based on alternate fuels/technologies. This just goes to show why M&M may have the required expertise to not just offer alternate mobility solutions to Ford, but also those which are indigenous and therefore cost effective and suited to Indian conditions. Almost all solutions for mobility – electric, hybrids (electric plus battery) – are quite expensive for commercial use even now. In other markets where these technologies have been actually put to commercial use, respective governments have had to offer subsidies to encourage these. With such a partnership, cost-effective alternate fuel technologies may well get developed.

As per the statement the two potential partners, “The spirit of ingenuity has driven Mahindra to be amongst the few global companies pioneering the development of clean and affordable technology, and is the only player with a portfolio of electric vehicles commercially available in India. Expanding its global presence, Mahindra owns majority stake in Ssangyong Motor Company in Korea, has forayed into the shared mobility space with investments in ride sharing platforms in the USA, and is developing products like the GenZe - the world’s first electric connected scooter.”

The recent outburst by Transport Minister Nitin Gadkari about forcing all vehicle makers switch to electric in the next three years – never mind technological and cost challenges – in India should also be seen as a mild trigger for more such partnerships for automakers to survive in a rapidly changing world. Besides, Mahindra needs to piggyback on Ford’s distribution and reach to expand its global footprint. So, on paper at least, any such potential partnership looks good.

It is not a done deal though. The agreement merely states that teams from both companies will meet and discuss regularly for three years on any collaboration and an agreement will emerge only after this.

This article in The Hindu reminds us that M&M and Ford are revisiting a partnership, after breaking off an earlier alliance. Ford India Private Ltd was before March 1998 known as Mahindra Ford India Ltd. It entered India through a joint venture with M&M in which Ford held a 49 percent stake and M&M 51 percent. Ford gradually increased its stake in the venture to close to 85 percent and took over operational control from M&M. After M&M entered into a 51:49 equity partnership with French car-maker Renault, Mahindras and Ford had agreed to formally dissolve their relationship by selling their cross-holdings in each other. Accordingly, M&M sold its 15 percent share in Ford India and the US company, its undisclosed holding in M&M.

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Updated Date: Sep 19, 2017 14:48:07 IST

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