Mahindra-Ford’s latest alliance seems to be a 1995 redux

A Friend in need is a friend indeed. This old adage aptly sums up the second coming of the Mahindra & Mahindra (M&M) and Ford Motor Company (Ford) alliance. The two auto majors had first floated an equal (50:50) joint venture (JVs) 23 years ago, in 1995, around the time when the fourth phase of economic reforms (1998-2006) had kicked in, with easier FDI norms and an accent on inducting new technologies. The period saw the birth of several JVs in the automotive segment and the M&M-Ford JV proved a stepping stone for Ford to go it alone with its own manufacturing plant in Chennai. Mahindra, too, is expected to have gained know-how through the partnership. Mahindra Ford India, as the JV was called, had launched its first vehicle, the Ford Escort, in 1996. And in 1998, Ford increased its stake in the company to 72% and renamed it Ford India. While this time there is no JV plan, there seems to be an appreciation on both sides to act quickly to counter competition and up volumes. Ford hasn’t been faring too well in

India despite having been in the market for 20 years. It has failed to gain a strong footing, with a less than 3% market share to show for its efforts. The company currently sells five models in India: the compact-SUV Ecosport, premium SUV Endeavour, compact sedan Aspire, compact hatchback Figo and its iconic premium car model Mustang.

Ford’s situation had become so dire that in July last year Ford Motor’s CEO Jim Hackett said the company was reviewing its operations in India and some other markets and was on a 100-day review of its investments in the emerging markets. The company has 8 facilities in South America as well as units in Thailand, Taiwan and Vietnam, besides two in India. In fact, the company became the leading exporter of passenger vehicles from India with 1,62,584 units being shipped in the April 2017 to February 2018 period —natching the first spot from Hyundai — but largely because it isn’t able to find enough buyers for its models here. M&M, too, has been struggling to battle the increasing competition in the SUV segment — its bastion for long — from domestic passenger vehicle leaders Maruti Suzuki and Hyundai Motor. While M&M’s utility vehicle business has so far grown by over 5% in the current fiscal, it has ceded its numero uno position to Maruti Suzuki.

The Japanese carmaker’s bestseller, Vitara Brezza (sales of 12,000 units per month), has emerged the top-selling model in the compact SUV category, even as the Ertiga continues to deliver good volumes (5,000 units per month). Hyundai, on its part, has seen the Creta performing exceedingly well (selling 9,000 units per month) compared with M&M’s Scorpio (under 5,000 units monthly). M&M’s market share in the utility vehicles segment has also slipped to 25% at the end of February from 29% a year ago, as the big car makers invaded its turf. The new alliance aims to help Ford expand its reach in India — M&M has 1,700 touch points in the country with about 900 of them in rural markets, compared with 465 of Ford. M&M is also ramping up its network (to 2,300 touch points by 2019) and Ford is hoping to further benefit from this. Ford will also get access to M&M’s successful SUV platform and its powertrain. The two companies will also collaborate to build a new compact SUV platform that both will leverage to roll out their own models — as Renault-Nissan have with the Duster and Terrano. This could lead to a winner with cost and knowledge sharing between the auto majors.

But both initiatives will take time to bear fruit. According to Pawan Goenka, managing director, M&M, Ford’s new SUV to be made on M&M’s platform may not be launched before 2021. M&M will also look to gain from Ford’s presence in other emerging markets to help it make inroads, an area of association also forming part of the deal. Looked at from the pronouncements made by both automakers, the alliance appears to be a win-win to win market share and growth in a highly competitive environment. However, what the real deal is on commercials — what does M&M get for sharing its platform, how much accrues from powertrains, how the costs and spoils from the new platform are shared — and how successful the new platform will eventually determine who gains and how much.

M&M, for its part, hasn’t had long meaningful alliances in the recent past. After its alliance with Ford ended, M&M took a second shot in 2005 at manufacturing a car, the Logan, in a joint venture with French manufacturer Renault. But this arrangement collapsed in 2010 and now Renault-Nissan is also nibbling away at M&M’s share in its core segment of SUVs — the Renualt Duster and Nissan Terrano together selling about 1,200 units a month.