Ford-Mahindra partnership shows how to be better together
Ford’s research and development budget, at $7.3 billion last year, is equivalent to more than two decades of Mahindra’s expenditure on that front
Sydney: The renewed alliance of Ford Motor Co. and Mahindra & Mahindra Ltd makes sense for a host of reasons.
As Gadfly has argued before, the car market that’s soon to be the world’s third-biggest is almost impregnable to new entrants thanks to the power of Maruti Suzuki India Ltd and, to a lesser extent, Hyundai Motor Co. Within the past four months alone, two of the world’s largest auto companies, Volkswagen AG and General Motors Co., decided the competition was too tough and backed away from India.
There are, however, two weak points in Maruti Suzuki’s formidable armour: SUVs, and electric vehicles. On both fronts, Mahindra is a natural ally.
It’s the country’s original builder of all-terrain vehicles. Mahindra has been making Jeeps since 1945, decades before the brand’s current association with Chrysler-owner Fiat Chrysler Automobiles NV. Its Thar SUV is a Jeep in all but name, and the TUV300 has a distinctly Jeepish look about it. In utility vehicles, it’s traditionally had a market share approaching 50%.
In electric cars, being pushed by the government with sales taxes 31 percentage points below those on conventional vehicles and hybrids, it’s also been a pioneer since its 2010 acquisition of Reva Electric Car Co.
Those positions are now under threat. Maruti’s Vitara Brezza urban SUV has taken a devastating swipe at Mahindra’s dominance in utility vehicles since its introduction 18 months ago, becoming the fourth-best selling car in the country. So far this year, Maruti’s utility vehicles have out-sold Mahindra’s, an almost inconceivable state of affairs a few years back.
With Fiat Chrysler also now selling its own made-in-India Jeeps and Hyundai targeting the local market with its Creta SUV, Mahindra badly needs to revamp a product range that’s in danger of looking staid in comparison.
Electric cars are in a similar quandary. For all Mahindra’s efforts, it managed to sell just 7,000 or so EVs over the past seven years, an even more dismal performance than the derided Tata Motors Ltd. Nano microcar. While it’s been pinning hopes of turning that situation around on electric buses and trucks, favourable tax rates aimed at decarbonizing road transport are encouraging its rivals. Hyundai, for one, is reported to be considering all-electric versions of its Ioniq hatchback and Kona SUV for the Indian market.
What does Ford bring to this contest? Its EcoSport is probably the best mass-market challenger to the Vitara Brezza in India’s small SUV market, and though it’s a relatively minor player in the EV space to date, it’s had almost six years of practice making the electric version of its Focus hatchback. More importantly, its research and development budget, at $7.3 billion last year, is equivalent to more than two decades of Mahindra’s expenditure on that front.
These sorts of tie-ups don’t always work. Volkswagen pulled back from its mooted alliance with Tata Motors in August, five months after announcing the agreement, and a previous Ford-Mahindra partnership was unwound in 2005 after an uninspiring decade.
Still, as Toyota’s attempts to sidle up to Maruti Suzuki via Suzuki Motor Corp. and the VW-Tata failure demonstrated, rich-country automotive know-how plus Indian marketing and distribution could be a potent combination. Ford and Mahindra will be stronger together than apart. Bloomberg Gadfly
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