(Reuters) – Ford Motor Co. said on Thursday it would abandon its car partnership with Mahindra and Mahindra Ltd in India due to the challenges caused by the COVID-19 pandemic. (Ford.to/2X2V6Gg)
The companies said in separate statements that the decision was driven by changes in the global economy over the past 15 months, prompting both to reassess their capital allocation priorities.
“The global economy and the business environment are not the same as in October last year,” said Ford spokesman TR Reid.
The deadline to complete a joint venture was Dec. 31, and both decided to end the agreement rather than reach an agreement or extend the timetable to do so, Reid said.
In October 2019, Ford and Mahindra said they would form a joint venture in India to reduce costs for developing and producing vehicles for emerging markets. The companies said at the time that they expect to launch three new commercial vehicles, starting with a medium-sized SUV, and jointly develop electric vehicles for emerging markets.
Asked if these vehicles have been canceled now, Reid said: “At the moment, there is nothing to talk about except that the joint venture will not happen.” Ford said its independent operations in India will continue.
The pressure to continue mergers or alliances in the automotive industry has increased as the costs of developing electric and autonomous vehicles cause companies to keep funds for these efforts. PSA and Fiat Chrysler Automobiles NV in France expect to close their $ 38 billion merger in the first quarter of 2021.
Ford executives have repeatedly advocated 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 would seek to partner with another Southeast Asian carmaker.
Mahindra said in a statement that the decision will have no impact on its product plan and that it is accelerating efforts to develop electric SUVs.
Report by Ankit Ajmera in Bengaluru; Editing by Maju Samuel, David Gregorio and Dan Grebler