Mahindra XUV500

Ford, Mahindra calls off auto joint venture as coronavirus crisis continue

Ford Motor said on Thursday it was calling off its automotive joint venture with Indian automaker Mahindra and Mahindra Ltd because of the challenges caused by the COVID-19 pandemic.

The companies said in separate statements that the decision was influenced by changes in the worldwide economy during the last 15 months, causing both to revaluate their capital allocation priorities.

“The global economy and business environment are not the same as October last year,” Ford spokesman T.R. Reid said.

The deadline to finalize a joint venture between the automakers was December. 31, and both made the decision to end the agreement instead of closing a deal or extend the timetable to do so, Reid said.

In October 2019, Ford and Mahindra said they would form a joint venture in India in a move to slash costs for developing and producing vehicles for developing markets. The companies said at the time they expected to release three new utility vehicles, starting with a midsize SUV, and also jointly develop electric vehicles for developing markets.

Asked if those automobiles were now canceled, Reid said, “At this point, there’s nothing to talk about other than the joint venture isn’t going to happen.” Ford said its independent operations in India are going to be continued.

The pressure to pursue mergers or alliances in the auto industry has been observed more often these days as the costs of developing electric and self-driving vehicles drive companies to preserve funds for those efforts. French automaker PSA and Italian-American automaker Fiat Chrysler Automobiles NV expect to close their $38 billion merger in the first quarter of 2021.

Ford executives have repeatedly touted a company strategy that consists of partnerships, including with Mahindra, as a way to boost performance and reduce costs on its path to achieving 8% global operating profit margins. Reid said that strategy would continue when asked whether Ford would look to partner with another automaker in Asia.

Mahindra said in its statement that the decision will not have any effect on its product plan and that it is speeding up efforts to develop electric SUVs.

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