Ford Motor Co is nearing a deal with Mahindra & Mahindra to form a new joint-venture company in India, a move that will likely see the US automaker cease independent operations in the country, two sources with direct knowledge of the talks told Reuters. The deal would make Ford the latest automaker to pare back its interests in India. At the end of 2017, General Motors Co downsized its Indian operations and stopped selling cars locally, dealing a blow to Prime Minister Narendra Modi’s strategy to encourage domestic manufacturing. Over two decades, Dearborn, Michigan-based Ford invested more than $2 billion in India but has consistently struggled - it currently has a market share of just 3 percent in India, one of the world’s fastest-growing car markets. Under the terms of the deal being negotiated, Ford will form a new unit in India in which it will hold a 49 percent stake, while Mahindra will own 51 percent, the two sources said.
The US carmaker’s Indian unit will transfer most of its current automotive business to the new entity, including its assets and employees, according to one of the sources. The deal is expected to close within 90 days, the sources said, adding the value of the transaction was not yet clear. They spoke on condition of anonymity because of the sensitivity of the matter. Ford said it does not comment on speculation, but added both companies continue to work together “to develop avenues of strategic cooperation that help us achieve commercial, manufacturing and business efficiencies”.
Mahindra too said it does not comment on speculation. It said in a statement 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 through its wholly-owned subsidiary. In 2017, it formed a strategic alliance with Mahindra under which, among other things, they will build new cars together, including sport-utility vehicles and electric variants. Ford has been globally restructuring its businesses with an aim to save $11 billion over the next few years. Last month, its Russian joint venture said it would close two assembly plants and an engine factory in Russia, exiting the country’s passenger vehicle market. India has been a major growth area for global car manufacturers but growth has slowed of late - car sales grew by 3 percent to just over 3.3 million units in the last fiscal year to 31 March, compared with 8 percent the previous year.