Ford’s foray into India soon after the country opened up its economy to foreign investment was a momentous event, and over the past decades, the American car manufacturing giant had made a name for itself in one of the biggest economies in the world. In addition to that, it was remarkable that the company had its own independent business in India and wasn’t involved with another company in a tie-up. However, it has now emerged that the iconic American company is all set to close its independent operations in the country and are going to set up a joint venture with Indian company Mahindra & Mahindra.
The reason for stopping its independent operations is down to the fact that despite being present in the country for around two decades, Ford has not been able to capture much of the market and it is indeed disappointing that they have not found much success in a rapidly growing car market. At this point of time, Ford has a market share of only 3%, and that comes after an investment of around $2 billion over the course of the past two decades. The move appears to be a part of Ford’s larger efforts to cut costs across the board in its businesses all over the world, and similar moves are underway in many countries where it has operations. According to most reports, the company has targeted cuts to the tune of $11 billion over the next few years.
Ford’s new joint venture with Mahindra will see them move their current assets to the new entity and the American company will have a stake of 49%. The source that is close to the developments stated that it was nothing more than a ‘partial exit’ for the company. However, the sort of money that Ford will be getting out of this joint venture remains unknown at this point of time.
Over the years, Ford has lagged behind in sales against the most dominant players in the market like Hyundai and Maruti Suzuki, which is why; it is an exit that makes sense for the American car manufacturer. Despite the hyper growth of the car market in India, Ford has not been able to keep pace with its key competitors. For Mahindra, the deal makes a lot of sense as well as the Indian company will now be able to get valuable insights into car manufacturing from one of the biggest companies in the world.