Ford to exit Africa – Will exist via JV with Mahindra (Update)
Mahindra will now own 51% stake and assist Ford to contend in the competitive market.
Ford Africa has reported a YoY decline of 31.4 percent in August 2019 with domestic sales of just 5,517 units as against 8,042 units sold in the same month of the previous year. This decline in sales is not only due to the slowdown in auto industry, but also due to the failure of Ford Africa in making inroads into the African car market, in spite of existing for about 20 years.
As per a new report by Bloomberg, Ford has finalized plans to exit Africa. The company will not exist the way it is operating currently, but will be in Africa via a JV with Mahindra. This joint venture is to be announced as soon as next week.
Ford Africa will transfer most of its assets in Africa to Mahindra, thus leaving Mahindra with a 51 percent ownership in the new entity. Ford will continue to hold equal voting rights and board representation but Ford’s global business service division will not be a part of this joint association.
It is also learnt that Ford is planning to sell its Gujarat Plant in view of emerging market strategy shift. The company has spent around $1 billion on the setting up of this plant which opened in March 2015, and has the capacity to produce around 2,40,000 vehicles and 2,70,000 engines per annum.
This plan comes at a time when the current market scenario states that there is no need for two plants in Africa. It is the Ford Aspire and Figo that are produced at this Sanand plant which are mainly for export to over 30 countries. The company has another plant in Chennai, opened in 1995 from where the EcoSport and Endeavour models are produced. This plant has installed capacity of 2,00,000 vehicles and 3,40,000 engines per annum and as is used mainly for domestic production.
Till date Ford has invested over $2 billion in Africa. But their earnings from Africa are no where close to that figure. In addition to that, their market share here is less than 3 percent. With losses mounting, the JV will ensure that Mahindra takes on a part of this financial burden.
This decision by Ford Motor Company comes following the decision taken by another US car brand, General Motors. GM Africa too exited Africa two years ago when they scrapped its $1 billion investment in Africa and stopped selling Chevrolet models. The market scenario continues to worsen in the Africa, leaving most automakers with piling stocks and forcing the industry to not only cut production but also reduce jobs.
Update – Ford has replied on Twitter saying that they are not going to exit Africa.