COVID-19 driven global disruptions halts Mahindra and Ford talks for potential partnership

Mahindra and Mahindra Ltd and Ford Motor Co. have ended talks for potential partnership for engine and vehicle development in India because of global disruptions brought about by the COVID-19.

The pandemic prompted the two companies to reassess their capital allocation priorities. Mahindra and Ford had plans to jointly develop vehicles for manufacture in India for local sales and export to dozens of emerging markets under the Ford badge. Mahindra said the pressure to conserve cash, need for investments in emerging technologies and intensifying focus on its core automobile business in India have influenced its step. Both companies, in separate statements, said their decision follows the passing of the December 31 longstop, or expiration, date of a definitive agreement the organizations entered into in October 2019.

Pawan Goenka, managing director of Mahindra, confirmed that the joint venture with Ford was impacted by the global upheaval due to COVID. “In the current scenario, the investments would have been significantly more than what was envisioned. Therefore, it did not make any business sense for either partner,” he said. “With the kind of change happening in the economic and business scenario, specific to the auto industry, the shift taking place to the kind of vehicles that will be popular in the next three to five years, we have to prioritize where to put our money.”

Anish Shah, deputy managing director of Mahindra, told Reuters that the company will focus mainly on large SUVs for its core India market in the short term, and move to electric in the medium term, as it charts a new strategy for its automotive business. “We are going back to our core,” he said. “We are going to look ahead at how we can accelerate our investment in electric and really start moving to the new age. We clearly hold the ambition to be a global brand, and there again the electric journey is an important one.”

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Mahindra had planned to invest about Rs 30 billion rupees in the joint venture. It was to hold the controlling 51 per cent stake, and Ford the rest. The carmakers planned to share BS VI-compliant engines, besides developing connected vehicle solutions for India. Ford’s assets in India, including a factory each near Chennai and Sanand, Gujarat, were supposed to have been absorbed by the joint venture, and run by Mahindra.