Indian Prime Minister Narendra Modi’s idea of promoting domestic manufacturing has taken another hit with the US automaker giants likely to pull out of their independent operations in India by making a deal with the local automaker giants Mahindra & Mahindra. According to the anonymous yet credible sources, the speculation revolves around the fact that Ford will only keep 49% of the stakes in the joint venture, with Mahindra holding the upper hand. Such a truce would make Ford partially stop their operations in India for a while until further developments.
If the rumors are to be believed, Ford is taking this drastic step as the US Company has been unable to get a grip on one of the fastest growing car markets in the world. According to IHS Markit, a forecasting firm, India is set to become the third-largest car market in the world by the year 2023 with an estimated 5 million units sold every year. However, the last year did see a decline in the numbers as only 3.3 million units were sold. The interesting thing to notice is that Ford covered only 3% of this market share, selling just 93,000 vehicles in India in FY 2018. There is no doubt in the fact that Maruti Suzuki and Hyundai Motor Co. are two of the biggest players in the country with Maruti Suzuki having a whopping 51% market share alone. It is naturally hard for Ford to compete in a price sensitive market like India with its high-priced vehicles. Such stats have led to Ford making such hard decisions like slowly stopping their operations in the Indian subsidiary.
When contacted, both parties did not confirm the proceedings or talks, as they chose not to comment on rumors. However, it a known fact that Mahindra and Ford have been in talks about such a joint venture from late 2017 itself. Both the sources confirmed about talks being held regarding a few of the identified paths. If Ford does go ahead with this deal, it will be the latest company to take out its operations from India after General Motors ended theirs just over a year and a half ago. Some believe that Ford too following suit may have a negative impact on the outside manufacturers and dissuade them about the Indian car market. However, many others believe that such a merger will benefit both Mahindra and Ford on multiple fronts. Ford will be able to produce cars at a lower price point as it would not have to pay the royalty to the global parent. Splitting the operations of the production and manufacturing process with Mahindra, the new system would allow both Mahindra and Ford to churn out vehicles at a faster rate.
With the deal likely to be official in 90 days, this development could be a game-changing moment for not just Ford and Mahindra but also for the Indian car market in general.