(Reuters) – Ford Motor Co. said on Thursday it would cancel its automotive joint venture with India’s Mahindra and Mahindra Ltd due to 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 global economy over the past 15 months, prompting both to review their capital allocation priorities.
“The global economy and business environment are not the same as in October last year,” Ford spokesman TR Reid said.
The deadline to conclude a joint venture between the companies was Dec. 31, and both made the decision to end the deal instead of closing a deal or expanding the schedule to do so, Reid said.
In October 2019, Ford and Mahindra said they would form a joint venture in India to reduce vehicle development and production costs for emerging markets. The companies then said they expected to launch three new commercial vehicles, starting with a mid-size SUV, and also jointly develop electric vehicles for emerging markets.
When asked if these vehicles were canceled, Reid said, “Right now, there’s nothing more to talk about that the joint venture won’t happen.” Ford said its independent operations in India will continue.
Pressure to pursue mergers or alliances in the auto industry has grown as the costs of developing electric vehicles and automatic driving lead companies to preserve funds for these efforts. PSA and Fiat Chrysler Automobiles NV, of France, expect to close their $ 38 billion merger in the first quarter of 2021.
Ford executives have repeatedly promoted a business strategy that includes partnerships, including Mahindra, as a way to increase efficiency and reduce costs on their way to achieving 8% of global operating profit margins. Reid said that strategy would continue, when asked if Ford would seek to partner with another carmaker in Southeast Asia.
Mahindra said in a statement that the decision will have no impact on its product plan and that it is stepping up efforts to develop electric SUVs.
Ankit Ajmera reports in Bengaluru; Edited by Maju Samuel, David Gregorio and Dan Grebler