M&M To Invest Rs 650 Crore For 51% Stake In Ford Joint Venture
Mahindra & Mahindra Ltd. and Ford Motor Company Inc. have partnered to develop, market and distribute vehicles in India and other high-growth emerging markets around the world.
Mahindra will own a 51 percent controlling stake in the joint venture and Ford will own the remaining 49 percent, the Indian automaker said in an exchange filing.
The JV will be formed by Mahindra investing around $100 million, or Rs 650 crore, to acquire 51 percent stake in Ardour Automotive Pvt. Ltd., a wholly owned subsidiary of Ford, Managing Director Pawan Goenka said in a press conference in Mumbai. Ardour Automotive will in turn acquire the automotive business of Ford India Pvt. Ltd., another wholly owned subsidiary of Ford.
“Valued at Rs 1,925 crore ($275 million), the Mahindra-Ford JV will drive enhanced competitiveness through greater economies of scale across the automotive value chain, including optimised sourcing, product development, use of relevant technologies and a global network," M&M said in the statement.
Jim Farley, president (new businesses, tech and strategy) at Ford said the JV would not only cater to the domestic market but would help tap new and bigger opportunities in the export markets.
The joint venture will sell Ford vehicles in India, and Ford and Mahindra branded vehicles in other markets.
The combined domestic market share would stand at 14 percent, said Mahindra Group's Executive Chairman Anand Mahindra. “More importantly the JV would be EBITDA positive from the first year of operations.”
Watch | M&M, Ford Managements Address The Media On Joint Venture
Here are the other highlights:
- Ford will transfer its India operations to the joint venture, including its personnel and assembly plants in Chennai and Sanand.
- Ford will retain the Ford engine plant operations in Sanand as well as the Global Business Services unit, Ford Credit and Ford Smart Mobility.
- The Mahindra-Ford JV is expected to be operational by mid-2020, subject to regulatory approvals.
- The JV will be operationally managed by Mahindra, and its governance will be equally composed of representatives of Mahindra and Ford.
- The Mahindra-Ford JV expects to introduce three new utility vehicles under Ford brand, beginning with new mid-sized SUV.
According to Ankit Merchant, auto analyst at SMC Institutional Equities, the deal will help M&M get access to newer technologies, better scale and also help in saving costs.
The two companies had announced a strategic alliance in September 2017 to develop smaller SUVs, electric cars and other in-vehicle technologies.
The U.S. carmaker will take a $800-900 million impairment charge related to the value of its India assets in the third quarter, it said in a separate filing. Ford has invested $2 billion in India only to achieve a market share of less than 3 percent.