(Reuters) – Ford Motor Co said on Thursday that it was canceling its automotive joint venture with India’s Mahindra and Mahindra Ltd due to the challenges caused by the pandemic COVID-19. (ford.to/2X2V6Gg)
The companies said in separate statements that the decision was motivated by changes in the global economy in the past 15 months, causing both companies to reevaluate 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 finalize a joint venture between the companies was December 31, and both made the decision to close the deal instead of closing a deal or extending the schedule to do so, said Reid.
In October 2019, Ford and Mahindra said they would form a joint venture in India with the aim of cutting costs for developing and producing vehicles for emerging markets. The companies said at the time that they hoped to launch three new utility vehicles, starting with a midsize SUV, and also to develop electric vehicles for emerging markets.
Asked if these vehicles were canceled, Reid said: “At this point, there is nothing to talk about, except that the joint venture is not going to happen.” Ford said its independent operations in India will continue.
The pressure to seek mergers or alliances in the auto industry has grown as the costs of developing electric and autonomous vehicles lead companies to preserve funds for these efforts. French PSA and Fiat Chrysler Automobiles NV expect to close their $ 38 billion merger in the first quarter of 2021.
Ford executives have repeatedly praised a company strategy that includes partnerships, including with Mahindra, as a way to increase efficiency and reduce costs on its way to achieving 8% global operating profit margins. Reid said the strategy would continue when asked whether Ford would seek to partner with another automaker in Southeast Asia.
Mahindra said in its statement that the decision will have no impact on its product plan and is accelerating efforts to develop electric SUVs.
Reporting by Ankit Ajmera in Bengaluru; Editing by Maju Samuel, David Gregorio and Dan Grebler