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Ford (F), Mahindra Terminate JV in India, C-SUV Launch on Course

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Ford F has decided to pull the plug on the proposed automotive joint venture (JV) in India with Mahindra & Mahindra due to changes in the global economic and business conditions, thanks to the coronavirus pandemic-induced challenges.

In October 2019, Ford and Mahindra had entered into a definitive agreement to set up a JV to develop, market and distribute Ford brand vehicles in India; and Ford brand and Mahindra brand vehicles in the emerging markets. The JV was aimed at bringing cost efficiencies for the companies, with the target to roll out three new utility vehicles, and develop electric vehicles for the emerging markets.

Per the terms of the agreement, Mahindra would hold a 51% controlling stake in the JV and Ford would have transferred its Indian operations, including personnel and assembly plants, to Chennai and Sanand. Ford would only retain the engine plant in Sanand and the global business services unit, Ford Credit and Ford Smart Mobility.

The mutual decision to scrap the JV followed the expiration of the definitive agreement on Dec 31, 2020.

Amid the pandemic rattling the auto sector, Mahindra was not convinced that the venture would generate sufficient returns needed to justify the high investment. The decision formed part of a broader restructuring plan at Mahindra, per which the firm is exiting several loss-making businesses, including its South Korean unit SsangYong Motor. In fact, Mahindra is in discussions with a potential investor to sell its majority stake in bankrupt SsangYong Motor. The automaker has also discontinued its U.S. electric scooter unit GenZe and aviation business GippsAero.

The Indian automaker now plans on developing its core portfolio of sport-utility vehicles (SUVs) and the electric version in a bid to boost profit and cash flow.

While both companies have mutually agreed to call off the proposed JV, Ford and Mahindra will stick to the original plan for C-SUV — Ford's version of Mahindra's upcoming XUV500 (W605) — for India. Ford and Mahindra have decided to work together on the new C-segment SUV under a separate agreement known as Project Black. Both automakers have made considerable investments in this project and commenced work on the SUV as well. This new SUV from Ford will share its underpinnings with the XUV500, which is expected to hit the roads this April. The Ford version will likely be launched in early 2022.

Along with the C-SUV project, the decision for Mahindra to supply its 1.2-litre TGDi turbo-petrol engine to Ford for the EcoSport, as announced earlier, also remains intact. This engine will substitute the EcoSport 1.0 turbo-petrol variant that was discontinued last year. This version of the EcoSport is expected to be rolled out later this year.

Dearborn-based Ford designs, manufactures, markets and services cars, trucks, sport utility vehicles, electrified vehicles, and Lincoln luxury vehicles. Had the JV between Ford and Mahindra materialized, it would have doubled the revenues for the former in India.

However, in the wake of the pandemic, Ford and Mahindra have amicably agreed to call off the JV. Nonetheless, Ford’s independent operations in India will remain unaffected.  

Ford, peers of which include Fiat Chrysler Automobiles FCAU, General Motors GM and Tesla TSLA, currently flaunts a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Notably, shares of Ford have declined 4% in the past year, as against its industry’s rally of 257.1%.

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