Ending a seven-year partnership, US truck maker Navistar has pulled out of its joint venture with utility vehicle maker Mahindra & Mahindra. M&M has bought Navistar’s 49% stake in the fledgling truck business for Rs.175 crore.
Subject to regulatory approval, both the truck production arm Mahindra Navistar Automotive Ltd and engine production unit Mahindra Navistar Engines Pvt Ltd will become fully owned subsidiaries of M&M by early 2013.
Navistar would continue to support M&M through a licence agreement for the purpose of business continuity, a joint statement said.
In the two years since it started production, Mahindra Navistar has commandeered 1.5% of the Indian commercial vehicle market. Troy Clarke, president and chief operating officer, Navistar, said “The Indian market has not expanded as we had originally expected and industry challenges continue in the near term. Given Navistar’s 2013 priorities, our capital and focus need to be allocated to other opportunities.”
Indian truck market, charecterised by its cyclical nature of growth, is going through a downturn as slow economic growth and industrial production have led to decrease in goods movement.
The increased competition and tepid demand pose a challenge to all truck makers. The medium and heavy truck segment saw 20% decline in this financial year so far.