Mahindra & Mahindra has decided to purchase 51 percent of long-time ally Ford's India business. After two decades of operating in the country, Ford will now operate in India as part of a joint venture with M&M, in which Ford will hold 49 percent stake and M&M 51 percent.
The JV will develop, market and distribute Ford brand vehicles in India, and Ford and M&M brand vehicles in emerging markets, according to a joint statement from the two companies.
The JV is expected to be operational by mid-2020.
While Ford India has invested nearly $2 billion in India in the last two decades, it managed a valuation of only $275 million for the joint venture. Jim Farley, president of Ford New Businesses told CNBC-TV18 that the company was comfortable with the valuation, agreed upon a round of hard negotiations.
When asked if M&M will look to collaborate with Ford for a possible entry in the US market, Pawan Goenka, MD & CEO at M&M said the alliance is currently focused only on emerging markets.
Ford will transfer its personnel and assembly plants in Chennai and Sanand to M&M. However, Ford will retain the engine plant operations in Sanand, Global Business Services Unit, Ford Credit and Ford Smart Mobility.
Ford has made it clear that the company's focus in the JV is going to be on growing exports from the additional capacity that the company will get from its alliance with M&M.
It also said it intends to grow significantly in the UV market in India and emerging markets.
Ford and Mahindra & Mahindra, however, will not make co-branded cars.
M&M will look to achieve an international scale through this partnership, additional capacity through Ford's manufacturing plants in India and economies of scale in EV production.
Ford and M&M have been long-time strategic allies, with the two companies collaborating on developing EV technology and new platforms recently.