(Reuters) -Ford Motor Co said Thursday it was shutting down its automotive joint venture with India’s Mahindra and Mahindra Ltd due to the challenges posed by the COVID-19 pandemic. (ford.to/2X2V6Gg)
The companies said in separate statements that the decision was prompted by changes in the global economy over the past 15 months, prompting both to reassess their priorities for capital allocation.
“The global economy and business environment are not the same as last October,” said Ford spokesman TR Reid.
The deadline to finalize a joint venture between the companies was Dec. 31, and both made the decision to end the deal rather than make a deal 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 manufacturing vehicles for emerging markets. The companies said at the time that they expected to launch three new commercial vehicles, starting with a mid-sized SUV, and also jointly develop electric vehicles for emerging markets.
Asked if those vehicles had now been canceled, Reid said, “At this point, there is nothing to discuss other than that the joint venture will not take place.” Ford said its independent operations will continue in India.
The pressure to pursue mergers or alliances in the auto industry has increased as the cost of developing electric and self-driving vehicles drives companies to save money for those efforts. French PSA and Fiat Chrysler Automobiles NV expect to complete their $ 38 billion merger in the first quarter of 2021.
Ford executives have repeatedly touted a business strategy that includes partnerships, including with Mahindra, as a way to increase efficiency and reduce costs towards 8% global operating profit margins. Reid said that strategy would be continued when asked if Ford would like to partner with another auto maker in Southeast Asia.
Mahindra said in his statement that the decision will not have any impact on its product plan and that it will accelerate efforts to develop electric SUVs.
Reporting by Ankit Ajmera in Bengaluru; Edited by Maju Samuel, David Gregorio and Dan Grebler