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M&M confident about Ford JV, says Goenka

02/11/2019 | Author: Autoguide | 0 Comments Back To Home   < Previous News   |   Next news >

Announcement of the partnership

Ford’s decision to partner Mahindra & Mahindra for its Indian operations has its fair share of sceptics, but the leadership at the SUV and tractor-maker believes the second alliance in as many decades between the two points to a mutually beneficial journey ahead, according to report published in the Economic Times. 
Some analysts said the latest tie-up would do little to boost capacity utilisation at the locally listed automaker in the current demand environment, while others cited Mahindra’s ‘far-from successful’ previous alliances with Navistar and Renault. 
Mr Pawan Goenka, Managing Director, M&M, disagreed about the fate of the latest venture. “We parted ways as friends. These JVs were never failures,” he said, referring to the previous tie-ups. “For the foreign partners, the collaboration was for entering the Indian market, while we wanted to learn sourcing, advanced technology and manufacturing. We met our objectives, and they met theirs. After 15 years, Ford and Mahindra are back together, which shows the confidence we have in each other”, said Mr Goenka.
M&M and Ford (India) recently announced a joint venture, with the former holding a 51 per cent stake. The JV includes the automotive business of Ford India, excluding the Sanand powertrain facility that feeds Ford’s global markets. 
Through the JV, M&M gets access to two new mid-size SUVs on FIPL’s platform, leading to a shorter model introduction cycle. In addition, the upcoming emission regulations would have increased the company’s R&D expenses. The JV will help both to reduce vehicle development costs. 
Also, with access to Ford’s BEV platform, M&M is likely to navigate the regulatory hurdles with relative ease, a recent JM Financial Institutional Security report said. 
It is critical for M&M to get its next few launches right and start gaining market share. Edelweiss says there is lack of clarity on whether M&M will be able to leverage Ford’s petrol engine expertise, which could help M&M in its BS-VI transition. 
Recently, VW-Skoda also announced the merger of their India business. Similarly, Suzuki and Toyota are also working on India-specific alliances. The M&M management is not unduly concerned about questions over sourcing synergies or capacity utilisation. “It also means that for several years, neither Mahindra nor the JV will need to invest in building capacity,” Mr Goenka said. “There is also a huge opportunity in exports, both for Mahindra and Ford. Mahindra will be able to leverage the Ford distribution network in emerging markets and Ford will be able to leverage Mahindra’s products”, he said. 
Exports account for about 7-8 per cent at M&M and the JV will help enhance shipments through Ford networks, particularly in the Gulf and Asean countries. Ford is the biggest exporter of PVs from India, shipping out 1,62,800 units in FY19.

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