When Mahindra & Mahindra and Ford Motor Company announced their intent to team up earlier this week, it marked the coming together of two former allies. Both companies had forged an alliance in the mid-1990s and split three years later.
Today, as they prepare to take on the new challenges emerging in the automotive arena, it increasingly looks as if partnerships are the order of the day across the world. Clearly, the profile of the industry has changed with electric mobility, autonomous cars and ownership disruption being some of the new realities to reckon with.
This is true for both cars and two-wheelers where multinationals are keen on growing their presence in emerging markets, which offer tremendous growth potential but also pose challenges in terms of competitive costing.
The other reason for these alliances also boils down to survival in an arena where the rules of the game are changing by the day with legislation playing its part in areas like emissions. In countries such as Japan, partnerships help cope with an overwhelming force like China whose homegrown brands are keen on spreading their wings.
Beyond M&M and Ford in the Indian context, there was the recent instance of Tata Motors and a Skoda-led initiative exploring the option of joint product development. Eventually, the idea was shelved and it increasingly looks as if the Tatas will tap into the expertise of group company, Jaguar Land Rover, for e-mobility and SUVs as top priorities.
Suzuki, which is the monarch of India’s car segment, has turned to Toyota for a possible collaboration in R&D and technology. The following months could see more details emerging and it is a clear sign that Suzuki would much rather have another Japanese ally and not an encore like Volkswagen or General Motors.
Toyota recently bought 5 per cent in Mazda as part of a cross holding deal with the latter picking up 0.25 per cent as part of a foray into North America. Going forward, it will be interesting to see if Honda follows the alliance route for its car business where it is now getting quite apparent that Japan’s auto sector is in consolidation mode.
It was barely a week ago when Renault-Nissan-Mitsubishi made known its growth aspirations for the coming years. Not only will this turninto impressive annual production numbers of 14 million units over the next five years but will also see big strides being made in e-mobility.
For many years, Renault-Nissan had emerged a strong powerhouse for joint product development. Last year, Mitsubishi was given a lifeline by Nissan and the new three-way entity will be more than a force to reckon with especially in costing synergies.
This will have tremendous implications for countries like India, which was the launchpad for the first Renault-Nissan manufacturing facility in Chennai. Going forward, Mitsubishi will also become an integral part of this plan even as the country makes rapid strides in clean air emissions with Bharat Stage VI in 2020 followed by the more ambitious electric goalpost a decade later.
In the two-wheeler scene, Bajaj Auto has led the way with some successful partnerships. It has comfortably balanced partners such as Kawasaki and KTM of Austria. Recently, it announced an alliance with the UK-based Triumph, which is keen on growing its presence in emerging markets while Bajaj will get access to Europe and other Western countries.
The Indian motorcycle maker is already exporting 40 per cent of its production and the future could see this component increasing beyond 55 per cent as it leverages these new alliances. This will also help Bajaj in accessing new technology, which will hold it in good stead in an era of alternative fuels and e-mobility.
Again, on two-wheelers, Yamaha and Honda have decided to join hands on producing 50cc scooters in Japan, a niche product category that is fast losing its relevance. Yet, it is clear that the two former foes have bigger plans on hand, which could include collaborating on electric options.
Recently, there was news of China’s Great Wall Motors apparently interested in acquiring the Jeep brand from Fiat Chrysler Automobiles. The story was subsequently denied but this does not mean that the Chinese can be ignored. Just look at Geely’s successful integration of Volvo Cars. Likewise, partnerships such as SAIC-General Motors or Dongfeng-PSA may get globally stronger in the coming years.
M&M spreading its wingsOn the subject of Chinese automakers, there were reports doing the rounds that Changan Automobile would make use of Ford’s excess capacity at its India plants. Nothing was confirmed and the latest move by the American automaker to join hands with M&M pretty much dispels this story.
The fact that the two are back as allies clearly indicates that there was no acrimony when they decided to go their own ways. This was the time M&M chose to focus on its core strength of SUVs, which paved the way for the Scorpio.
Ford, likewise, hit the bull’s-eye with the Ikon but could not quite build on this momentum with subsequent products. This did not deter it from commissioning a second plant in India even as domestic market share remained elusive. However, as part of its One Ford plan, India was critical as a small car/engine hub to cater to other emerging markets like Latin America and South Africa.
Over the years since it moved on without Ford, M&M decided to spread its wings across a host of mobility solutions even while SUVs remained its bread-and-butter business. It forayed into two-wheelers, trucks and pickups while make known its commitment to electric vehicles (EVS).
There was a brief return to cars through a Renault alliance while a reasonably big ticket buyout happened with the ailing SsangYong Motor of South Korea. Where it stood tall in the SUV space till not-so-long ago, M&M now has to reckon with stiff competition, which has dented its market share significantly.
It has also made little headway in trucks and two-wheelers while the foray into e-mobility has yielded little in terms of numbers. There is perhaps more hope now with the Centre’s focus on EVs. It will be interesting to see how M&M leverages the Ford alliance while balancing this with SsangYong. Perhaps, a new SUV platform could be the first building block of this partnership.