At the same time, the Indian car, tractor and truck maker, the core part of the $14.4 billion diversified Mahindra Group, will take its own rugged sport utility vehicles (SUVs) elsewhere, to emerging markets such as Brazil and South Africa - though it is developing engines to be used across both brands.
Mahindra's muscular jeeps have for decades been a favourite in India's rural hinterland, and its tractors work fields from Arizona to Zimbabwe. Cracking the Chinese market with Ssangyong would mark the next frontier for a company that has used booming domestic growth to fuel its global ambitions.
"China is a high priority for Ssangyong, but not for Mahindra," said Pawan Goenka, president of Mahindra's automotive and farm equipment sectors and chairman of Ssangyong, which the Indian company bought for $460 million in March last year.
Ssangyong Motor Co, which trails far behind Korean rivals Hyundai Motor and Kia Motors but is popular in Russia, was close to bankruptcy under its Chinese owners SAIC Motor Corp when Mahindra stepped in to buy a 70 percent stake.
The Indian firm started importing Ssangyong cars into China late last year, but has had "limited success" in a market that is slowing and which regards Ssangyong as a premium brand, Goenka said in an interview at Mahindra's headquarters in central Mumbai.
"An important hurdle we faced was the 'ghost of the past' at Ssangyong. They were clearly badly bitten by SAIC."
"It's said that SAIC did not do justice to Ssangyong. And there's an apprehension, a feeling, a concern that we may be a repeat of the same. To remove that concern has taken time. And I can't say it's gone 100 percent," he added. "That has been a little harder than we thought.
Goenka declined to say how many cars Ssangyong sold in China, but said the total lagged expectations. "The ramp-up has not been as we'd expected," he said. "If Ssangyong was a very strong brand in China, then clearly the market slowdown would not have affected us as it has."
"There is an action plan that includes brand building and pricing and what kind of product tinkering we do; whether there is a specific requirement of product the Chinese customer would want," he said.
The Ssangyong project is a career-defining initiative for Goenka, who spent 14 years at General Motors before joining Mahindra almost two decades ago.
Ssangyong, which makes the Korando and Rexton SUVs and the Chairman luxury marque, sold 114,000 vehicles in the year to end-March, exporting two-thirds of its production. Goenka expects sales to increase to 125,000 cars this year, and has set a target of 160,000 for 2013.
He said plant capacity could probably be increased to 180,000-200,000 vehicles at minimal extra cost. "It will take us to 2014 until we sweat the assets fully. That's very important," he said, noting depreciation as a part of Ssangyong's revenue was above the industry norm as the assets are under-utilised.
Ssangyong made a loss of around $80 million in 2011, three times bigger than its 2010 loss, but it was offset by unlocking working capital tied up in the company.
"As of now we have no plans (to take Mahindra to China)," said Goenka. "We are entering China through Ssangyong. Once that is successful, then we will evaluate whether it makes sense to bring Mahindra products there.
"Once the volume picks up, and we reach a certain economic level, then we will look at manufacturing in China," he said, adding that all new vehicle platforms will be shared by Ssangyong and Mahindra cars. "Together we are developing next-generation transmissions, which is a fairly expensive program that neither Mahindra nor Ssangyong could justify doing on their own."
BRAZIL IN FOCUS
With a shipment of 600 jeeps to the former Yugoslavia in 1969, Mahindra became India's first car exporter. In market value, Mahindra & Mahindra is about half the size of Tata Motors, which owns the Jaguar and Land Rover brands. Today, Mahindra and its subsidiaries sell more than a quarter of their passenger car and commercial vehicles outside India.
The auto unit - which contributed around two-thirds of Mahindra Group revenue in the year to March 2011, and 86 percent of net profit - assembles and sells its own-branded tractors in the United States and Australia, and exports cars and commercial vehicles to Africa, Europe and South America.
"For Mahindra, Brazil is a big focus market," said Goenka, who plans to take the company's Scorpio jeep and new XUV 500 sport utility to that market soon. Goenka played a major part in developing the popular Scorpio, and drives a white XUV 500.
One market where Mahindra does not sell its passenger cars is the United States. It was forced to suspend its entry plans by a long-running legal dispute with a former distributor. That was settled in March, and Mahindra, but not Ssangyong, should be heading into the market shortly.
"We will soon be making our plans known as to what we plan to do in the United States," said Goenka. "The U.S. is turning around, its auto industry is in better shape than many other markets. The love for large SUVs and pick-up trucks is back, which is good for us."
While Ssangyong won't be part of any planned assault on the U.S. market, the brand last month entered South Africa in conjunction with the Mahindra distribution network there, and could soon use its parent company to enter other markets.
"We have three distribution companies, in South Africa, Australia, and Italy. They do nothing but sell Mahindra vehicles, so they could sell Ssangyong also," Goenka said.
India's biggest SUV manufacturer saw its car sales grow 15 percent in the year to end-March, well ahead of the industry's 2.2 percent overall growth. In response to rising demand, Goenka said Mahindra will spend around 30 billion rupees on a new 250,000-vehicle factory in India.
0 comments:
Post a Comment