Ford Motor is close to a deal with Mahindra & Mahindra to establish a new joint-venture company in India, a move that will probably see the U.S. automaker stop independent operations in the nation, two sources with a direct understanding of the talks informed Reuters.
The deal would make Ford the recent automaker to pare back its interests in India. At the end of 2017, General Motors reduced its Indian operations and stopped selling cars regionally, dealing a blow to Prime Minister Narendra Modi’s strategy to support domestic manufacturing.
Over two decades, Ford invested over $2 billion in India and it currently has a market share of only 3 percent in India. India is one of the world’s fastest-growing auto markets.
Under the terms of the deal being negotiated, Ford will establish a new unit in India in which it will hold a 49 percent stake, whereas Mahindra will own 51 percent, the two sources stated.
The U.S. automaker’s Indian unit will move the majority of its current automotive business to the new entity, consisting of its assets and employees, according to one of the sources.
“It’s like a partial exit (for Ford from India),” the source stated.
The deal is expected to close under 90 days, the sources stated, adding the value of the transaction was unclear.
They spoke on condition of anonymity due to the sensitivity of the matter.
Ford stated it does not discuss speculation, but added both companies would keep working together “to develop avenues of strategic cooperation that help us achieve commercial, manufacturing and business efficiencies”.
Mahindra too stated it does not discuss speculation. It stated it was “working together in identified areas” with Ford after a 2017 partnership arrangement, and “will announce further definitive agreements as we progress on some of the other areas.”
Currently, Ford manufactures and sells its cars in India via its wholly-owned subsidiary. In 2017, it established a strategic alliance with Mahindra under which, among other things, they will construct new cars together, consisting of sport-utility vehicles and electric variants.
Ford has been internationally restructuring its businesses with a motive to save $11 billion during the next few years. Last month, its Russian joint venture stated it would shut down two assembly plants and an engine factory in Russia, departing the country’s passenger vehicle market.
