Ford Motor Company (F -0.41%) and Indian automaker Mahindra and Mahindra (MAHMF -11.20%) have announced a new alliance.
The two have agreed to work together on a number of initiatives that could help Ford, which had considered leaving India, to gain a better foothold in a country that's set to become the world's third-largest new-vehicle market.
Right now, Indian consumers don't buy a lot of Fords. Most of the vehicles built by Ford's Indian factories are exported. Among them: The new EcoSport SUV will come to the U.S. from India. Image source: Ford Motor Company.
About the deal between Ford and Mahindra
In a joint statement, Ford and Mahindra said that they will work together for up to three years as they explore a longer-term strategic alliance. The two companies will cooperate on various technology initiatives, while helping Ford to expand its reach within India -- and helping Mahindra to expand its reach outside of its home country.
If things go well, it could lead to a more significant, longer-term arrangement, the companies said.
Jim Farley, who oversees Ford's global business units, emphasized Ford's long-term commitment to India. He said that the agreement will help both companies prepare for the wave of transformation coming to the global auto industry:
Ford is committed to India and this alliance can help us deliver the best vehicles and services to customers while profitably growing in the world's fifth largest vehicle market.
Our two companies have a long history of cooperation and mutual respect. The memorandum of understanding we have signed today with Mahindra will allow us to work together to take advantage of the changes coming in the auto industry. The enormous growth potential in the utility market and the growing importance of mobility and affordable battery electric vehicles are all aligned with our strategic priorities.
The rugged Mahindra Bolero is India's best-selling SUV. Image source: Mahindra and Mahindra Ltd.
Who is Mahindra?
Mahindra is an India-based industrial giant that builds farm equipment and vehicles of many different kinds. Its automotive unit is India's third-best-selling auto brand and the country's longtime market leader in SUVs. Mahindra's sturdy Bolero SUV has been India's best-selling SUV model for several years.
What does this deal mean for Ford?
It means that Jim Hackett, who became Ford's CEO in May, appears to be taking Ford in a different direction in India.
Ford made big investments in India early in the decade, building two factories in anticipation of significant sales growth in the years to come. But the expected sales growth didn't materialize. In 2013, Ford shifted its strategy, declaring that its Indian factories would make vehicles for export while it waited for local demand for its products to increase. Ford has followed through on that plan -- the new-to-the-U.S. Ford EcoSport SUV will come from India -- but Indian consumers still aren't buying Fords in big numbers.
Ford's patience had run thin. Former CEO Mark Fields said last year that Ford's business in India hadn't met its financial and performance goals and was being reevaluated. But apparently, Hackett wants to try harder to make Ford a player in the challenging Indian new-vehicle market.
What's next for Ford in India?
Hackett is expected to present his vision and plan for Ford in a briefing for investors on Oct. 3. I expect we'll learn a lot more about what he and Ford are now thinking for India during that briefing.
