“We are reviewing our businesses strategy, making choices and allocating capital consistent with the plan to achieve an 8 percent company adjusted EBIT margin and generate consistently strong cash flow,” spokesman Kapil Sharma said. “We will have more details to share at a later date.”
For Mahindra it would have been an opportunity to enter new global markets, but it walked away from the deal over concerns its return on investment would be too low.
Mahindra said in a statement that the automakers are looking at ways to collaborate. “We have defined a timeline till the end of March for this work to be completed,” the company said.
Strategic rethink
Ford is weighing all programs it had planned for the joint venture with Mahindra and will review which ones it plans to keep from a profit standpoint, the second source said.
The most crucial was a mid-sized utility vehicles to be built by Mahindra on its vehicle platform and using its powertrain. Ford planned to launch this in 2022 with a target to sell around 50,000 units annually in India, two sources said. Mahindra, too, has asked suppliers to freeze work on this, they said.
Ford is also negotiating new terms, including costs, for an engine Mahindra was to supply for its EcoSport later this year, one of the people said.
For two other utility vehicles that Ford is building for launch in 2023 and 2024, the plan had been to use Mahindra engines. If it walks away from that deal, Ford will need to find another supplier or invest in upgrading its own engines, two people said.
It will come down to a cost versus profit analysis and that “hinges on discussions with Mahindra,” one of the sources said.
At a town hall earlier this month, Dianne Craig, president of international operations, said Ford was exploring all options when asked about the company’s plans following the end of the Mahindra relationship.
Ford’s average sales in India have languished at around 90,000 units a year prior to the economic slowdown in 2019 and the pandemic in 2020. But exports are nearly double what it sells in the domestic market and that helps it make money.
While Ford India reported pre-tax profits over the last three years, its biggest hurdle in India is low plant utilization of around 53 percent over a five-year average.
Even as it thinks about bringing global products to India — its Territory utility vehicle in China is an option — Ford will need to look at several factors including competition, new fuel efficiency rules and its ability to make money in a price-sensitive market to ensure success.
India’s competitiveness as an export base for affordable cars will also play a role, two people said.
“If Ford decides to invest more in India it needs to know by when it can recover that investment,” one person said.
