The companies said in a joint statement on Monday the areas of potential co-operation include connected cars, mobility programs, electric vehicles and sourcing among other areas.
“The agreement of intent between the two companies will allow each to leverage their mutual strengths during a period of unprecedented transformation in the global automotive industry,” the two companies said.
An alliance would also come as foreign car makers such as Volkswagen, General Motors and Fiat Chrysler have struggled in India where nimbler rivals such as Maruti Suzuki and Hyundai Motor have cornered roughly two-thirds of the market.
In May, General Motors said it would stop selling cars in India from the end of this year, drawing a line under two decades of battling in one of the world’s most competitive markets where small cars make up the bulk of sales.
The potential alliance would explore Ford leveraging Mahindra’s distribution reach within India and Mahindra looking to benefit from Ford’s reach in other emerging markets, the companies said.
“Teams from both companies will collaborate and work together for a period of up to three years. Any further strategic cooperation between the two companies will be decided at the end of that period,” they said.
Mahindra shares closed 0.1 percent higher in a Mumbai market that gained 0.7 percent.
Globally, traditional automakers are weighing how best to work on new, disruptive technology, from electric vehicles to autonomous driving, that require hefty investment and have turned firms such as Alphabet Inc’s Google and Tesla into rivals. One way is by joining hands.
Toyota Motor Corp said last month it planned to take a 5 percent share of smaller Japanese rival Mazda Motor Corp as part of an alliance that will see the two build a $1.6 billion US assembly plant and work together on electric vehicles.
Ford is among the top exporters of cars from India and manufactures and exports vehicles and engines from its plants in Chennai, Tamil Nadu and Sanand in Gujarat.
“Ford is committed to India and this alliance can help us deliver the best vehicles and services to customers while profitably growing in the world’s fifth largest vehicle market,” Jim Farley, Ford executive vice president and president of global markets, said in the statement.
Farley said the growth potential in the sports utility space and the growing importance of affordable electric vehicles in India are aligned with its strategic priorities.
The company has invested over $2 billion in India and plans to spend more to set up a global engineering centre in the southern city of Chennai that will help tweak products for the local market and more swiftly adapt to changing consumer trends.
Ford is increasing its focus on driving down costs by sourcing more parts locally and using more common features across models to achieve economies of scale.