Mahindra exploring tie-up with Ford to enter new markets

Nashik: Mahindra and Mahindra Ltd is exploring the feasibility of entering emerging markets such as Indonesia and Russia in partnership with Ford Motor Co. “We are exploring various aspects with Ford; manufacturing, sourcing, engineering or even on the retail front. But things are at a very initial stage (in these markets) to conclude what aspect we will be partnering on,” said Mahindra managing director Pawan Goenka.

In September 2017, Ford and Mahindra said that they are exploring a strategic alliance to “leverage Ford’s global reach and expertise and Mahindra’s scale in India”. The agreement, the firms said, would allow them to combine their strengths during a period of unprecedented upheaval in the automotive industry.

If Goenka’s plans go through, Mahindra will be the first Indian automaker to strike such a global alliance. Analysts say such an arrangement will benefit both auto makers.

“India is emerging as a regional manufacturing hub with scale economies to serve other smaller regional markets. In this situation, Ford can bring the experience in distribution to these markets, combined with the scale economies of manufacturing in India, which would optimize the combined capacity of both partners,” said Rakesh Batra, partner and national auto leader at consulting firm EY.

A similar pact between Tata Motors Ltd and Volkswagen AG failed to make progress after an initial agreement. A wave of consolidation is sweeping through the sector. Toyota Motor Co. has bought Daihatsu, while Nissan has acquired Mitsubishi. General Motors Co. has pulled out of some key markets, including India, and is doubling down on North America and China.

Amid all this, Mahindra has decided to develop products on a global scale, in collaboration with unit Mahindra Automotive North America (MANA) and iconic design firm Pininfarina SpA, Anand Mahindra, executive chairman of Mahindra, said at the launch of the Marazzo multi-purpose vehicle on Monday.

The Marazzo was the first product to be jointly engineered by MANA in Detroit and the Mahindra group’s research and development centre, Mahindra Research Valley (MRV) in Chennai. Pininfarina, which Mahindra bought in December 2015, worked on the design in collaboration with Mahindra’s local design studio in Mumbai.,p>The 1.5-litre, four-cylinder diesel engine on the Marazzo was jointly developed by MRV and Austria-based engineering and power train firm AVL List GmbH. “It (the Marazzo) is a proof of concept of Mahindra’s global network of R&D working together to deliver world-class products,” Mahindra said. “We have the confidence that we can once again use this neural network (of development centres) to deliver.”

Accordingly, Mahindra has already started development of another vehicle at MANA, which would see support from MRV, Pininfarina and Mahindra’s local design centre, Goenka said, without disclosing further details.

The development of Marazzo started four years ago, coinciding with the setting up of MANA. With a new platform, drivetrain, engine and transmission, product development costs for the multi-purpose vehicle are about $200 million, Goenka said. To compare, the Scorpio, launched in 2002 at Mahindra’s Nashik plant, was developed for $120 million.

Product development is increasingly becoming expensive because of regulatory compliances, testing and validation, said Rajan Wadhera, president of the automotive division at Mahindra.

More models on this new platform were under consideration, Wadhera said, adding that the compact sports utility vehicle code-named S201 to be launched this fiscal would be built on the platform with minimal changes.

With large families and businessmen as the target audience, Mahindra had set aside a fungible capacity of 8,000-9,000 units per month between the Marazzo and the S201, said Veejay Ram Nakra, senior vice-president, sales and marketing.

Mahindra hopes to add 9,000-10,000 units to its monthly sales, with three launches planned this fiscal and sees “a substantial” increase in market share, Nakra said.