Joint ventures as driving force

After withdrawing twice from the Indian market, Ford Motor Co is betting big on India for the third time. Ford recently said it plans to restart work at the Chennai plant to make cars that are initially aimed for exports.

“Had a very engaging discussion with the team from Ford Motors. Explored the feasibility of renewing Ford’s three-decade partnership with Tamil Nadu, to again make in Tamil Nadu for the world,” Tamil Nadu Chief Minister MK Stalin said in a post on X platform recently. The company’s statement did not divulge any immediate plans for the domestic market, though it is seen as a key reason behind the decision to make a comeback.

Ford, which had invested over $2.5 billion in India, tasted success with Ikon, Fiesta, Eco Sport mini-SUV and Figo small car before announcing the phasing out of its unit on September 9, 2021, and stopping production in Chennai in August 2022.

It was in 1995 that Ford entered the passenger car market in a 50:50 joint venture with Mahindra & Mahindra. In 1998, it raised its stake in Mahindra Ford to 72 per cent and renamed it Ford India.

Dynamics of JVs

• Since India has a low vehicular penetration, joint ventures help foreign entrants gain access to one of the most attractive automobile markets in the world.
• As the manufacturing cost in India is highly competitive, this can possibly make India an emerging export hub.
• The collaboration is a win-win situation for the entities as well as Indian consumers as the business roadmap focuses on extensive localisation and a robust automotive ecosystem across the country.
• This increases affordability and companies benefit from the economies of scale.
• The JVs also help in acquiring new technology that can help reduce costs, increase efficiency and stay ahead of the competition.

Again, in 2019, Ford and Mahindra announced a joint venture to develop, market and distribute Ford vehicles in India. Mahindra had a 51 per cent controlling stake. However, the partnership ended in 2020, and Ford exited the Indian market in 2021, before making a re-entry in February 2022 when it bagged benefits under the production-linked incentive (PLI) scheme for electric vehicles. However, it soon announced a withdrawal in May 2022.

Besides Ford, there has been a buzz in the market about Skoda Auto Volkswagen India scouting for a local partner who can help the entity in engineering, sales and procurement competency.

There have been many successful joint ventures in the passenger vehicle industry in the past 30 years.

JSW Group and SAIC Motor

In March this year, the $23 billion JSW Group, having diverse interests in sectors such as steel, energy, infrastructure and cement, and China’s SAIC Motor, a global Fortune 500 company with annual revenues of around $110 billion which owns and operates the MG Motor brand, formally announced their joint venture. It will produce both electric and internal combustion engine passenger vehicles for Indian as well as the export market.

This first major India-China joint venture in the passenger car industry would focus on creating a robust EV ecosystem with forward and backward integration of the supply chain. The new joint venture, JSW MG Motor India Pvt Ltd (JSW MG Motor India), will capitalise on the significant opportunities emerging in the fast-evolving Indian automotive sector.

During the formal announcement, it was said that JSW Group will have 35 per cent stake, Indian financial institutions 8 per cent, MG’s existing dealers 3 per cent and MG employees 5 per cent. The cumulative holding of Indian entities will be 51 per cent in the new company while SAIC will hold the balance 49 per cent stake. Also, the company will see an initial investment of Rs 5,000 crore.

MG Motor entered the Indian market in 2019, and has sold more than 2 lakh units since then. It has also invested close to Rs 7,000 crore so far.

Toyota Kirloskar Motor (TKM)

It is a joint venture between Toyota Motor Corporation, Japan, and the Kirloskar Group for the manufacture and sale of Toyota cars in India. It sells popular models like Urban Cruiser, Urban Cruiser Hyryder, Innova, Innova Hycross and Fortuner.

TKM’s first plant was established in 1997 and production started in 1999. The second plant was commissioned in 2010. The combined capacity is 3.42 lakh units per annum. In the JV, Toyota Motor Corporation has 89 per cent stake and Kirloskar Systems Ltd 11 per cent.

Renault-Nissan

The Renault-Nissan Alliance in India was set up in 2008 as Renault Nissan Automotive India Private Limited (RNAIPL), a 70:30 joint venture, with Nissan holding the majority share. In what was the first dedicated alliance plant globally, it began manufacturing operations in 2010 in Tamil Nadu. In the 15 years since, RNAIPL has sold over 14 lakh cars from both brands in the domestic market and exported over 12 lakh cars to more than 100 countries. That’s an average production of around 1.75 lakh cars per year, which, though considerable in absolute terms, is less than half of the plant’s annual capacity of over 4 lakh units.

Under the new framework agreement, RNAIPL will move to an ownership of 51 per cent Nissan and 49 per cent Renault.

Maruti Suzuki India Ltd

It was on October 2, 1982, that the Government of India and Suzuki of Japan signed a joint venture agreement and set up Maruti Udyog Ltd (formerly). Maruti was majority owned by the Indian Government with Suzuki only taking a 26 per cent stake. The company launched Maruti 800 in 1983, which transformed the car industry. The Indian Government gradually reduced its stake and departed the business in 2003, by making it a public company and then sold all of its remaining stake to Suzuki Motor Corporation in 2007.

Currently, it is the largest passenger vehicle maker with a wide range of portfolio, ranging from small entry-level cars to sedans and SUVs.

Honda Cars India Ltd

Honda Cars India Ltd (HCIL) is a 100 per cent subsidiary of Honda Motor Company Ltd, Japan. The company was established in 1995 as a joint venture, namely Honda Siel Cars India, in partnership with Usha International. After a 16-year partnership, in 2012, Honda acquired the stake of Usha International to become a 100 per cent subsidiary of Honda Motor Co, Japan.

Other collaborations

Some other joint ventures that once existed in the Indian four-wheeler space included Fiat India with Premier Automobiles, General Motors with Hindustan Motors, and Peugeot with Premier Automobiles, Mahindra & Mahindra and Renault.