Mahindra XUV 500 SUV Mahindra

Ford U-Turns in India as Mahindra Tie-Up Shows Urgency to Profit

Ford and Mahindra formed a partnership for three years, aiming to cooperate in areas including mobility programs, connected vehicle projects, electrification and distribution within India, improving Ford’s reach within the country.

Ford Motor Co. gave its lagging Indian operations a boost by reuniting with local SUV maker Mahindra & Mahindra Ltd. to explore electric cars and new technologies, as the U.S. automaker tries to gain a foothold in a country that’s set to become the world’s third-biggest car market.

Ford and Mahindra formed a partnership for three years, aiming to cooperate in areas including mobility programs, connected vehicle projects, electrification and distribution within India, improving Ford’s reach within the country, the automakers said on Sept. 18. The two companies parted ways in 2005 from a venture that mostly made sedans.

The development is an about-face for Ford after previous CEO Mark Fields had put the business in India under review.  Jim Hackett, who became CEO after Ford’s board ousted Fields in May, has now found a way to stay in India while sharing costs with Mahindra on product development and sourcing. In May, GM announced it was stopping sales in the Indian market.

“Ford is committed to India and this alliance can help us deliver the best vehicles and services to customers while profitably growing in the world’s fifth largest vehicle market,” said Jim Farley, Ford president of Global Markets.

The India plan is one of the most significant Ford has made in the first four months under Hackett, who had said he would conduct a 100-day review of Ford’s business. The former CEO of office furniture maker Steelcase Inc. is scheduled to lay out his strategy to investors on Oct. 3 in New York.

Suzuki, Hyundai

Ford re-entered India in mid-1990s, when the country opened its car market for foreign investment, by partnering with Mahindra. The two companies set up a factory near the southern city of Chennai and started making the Escort sedan. Ikon, Fusion, Fiesta, Figo and other models followed, but nothing gave the Dearborn, Michigan-based carmaker the success of Suzuki Motor Corp. and Hyundai Motor Co. in India. Ford and Mahindra ended their partnership in 2005.

Ford had a domestic market share of 3% while Mahindra had 7.6% in the financial year ended March 2017, according to the Society of Indian Automobile Manufacturers. Suzuki was No. 1 with 47% and Hyundai the second with 16.7%.

While Ford shares have risen modestly since the company changed CEOs, the stock is still down 4.2% this year, trailing GM and the benchmark Standard & Poor’s 500 Index.

The first major decision Ford announced after Hackett, 62, became CEO also involved the automaker’s operations in Asia. In June, the company scrapped a controversial plan to move production of Focus compact cars from Michigan to Mexico. Ford will instead export the Focus from an existing factory in China to North America, forgoing a $500 million investment.

Ford earned pretax profits of $143 million in the Asia Pacific Region in the second quarter, up $151 million from a year earlier. The company’s gains in the region came from growing sales and market share in China, especially of its SUVs and Lincoln luxury models. The automaker said it expected profits to continue to grow in the region this year.

After a record 2016, Ford’s sales in China have dropped 6.2% this year through August, as demand slumps for Focus cars and Kuga and EcoSport crossovers.

A flood of new models are slated to enter India over the next five years, intensifying competition in the country’s $30 billion auto market, which is expected to rank behind only China and the U.S. in sales by 2020, the Indian automakers association said earlier this month.

By Keith Naughton, P R Sanjai and Siddharth Philip

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