(Reuters) – Ford Motor Co. on Thursday said it was halting its joint venture with Mahindra and Mahindra Ltd in India over the challenges posed by the COVID-19 pandemic. (ford.to/2X2V6Gg)
The companies said in separate statements that the decision was driven by changes in the world economy over the past 15 months, which caused both to reevaluate their capital allocation priorities.
“The world economy and business environment are not the same as last October,” Ford Re spokesman TR Reid said.
The deadline to terminate a joint venture between the companies was 31 December. Both decided to terminate the agreement rather than conclude an agreement or expand the roster for it, Reid said.
In October 2019, Ford and Mahindra announced that they would establish a joint venture in India to reduce the cost of developing and manufacturing vehicles for emerging markets. The companies said at the time that they expected to launch three new utility vehicles, start with a mid-size SUV, and also jointly develop electric vehicles for emerging markets.
Asked if the vehicles had now been canceled, Reid said: “At the moment there is nothing to talk about except that the joint venture is not going to happen.” Ford has said it will continue its independent operations in India.
The pressure to pursue mergers or alliances in the automotive industry has increased as the cost of developing electric and self-driving vehicles drives companies to conserve funds for the efforts. France’s PSA and Fiat Chrysler Automobiles NV expect to close their $ 38 billion merger in the first quarter of 2021.
Ford executives have repeatedly identified a company strategy that includes partnerships, including with Mahindra, as a way to increase efficiency and reduce costs on its way to achieving global operating profit margins of 8%. Reid said the strategy would continue when asked if Ford wanted to work with another carmaker in Southeast Asia.
Mahindra said in his statement that the decision will have no impact on his product plan, and that it will accelerate efforts to develop electric sports utility vehicles.
Reporting by Ankit Ajmera in Bengaluru; Edited by Maju Samuel, David Gregorio and Dan Grebler