Mahindra & Mahindra to set up Europe R&D centre in a year

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Mahindra XUV500 Mahindra XUV500
SummaryProduct development centre to help focus on developed markets like US, Europe

In order to give a fillip to its global ambitions and compete with auto majors like General Motors, Ford and Volkswagen on their home ground, the country’s top utility vehicle maker Mahindra & Mahindra (M&M) aims to set up a new overseas ‘product development centre’ in Europe within a year. M&M, which will be the second domestic auto firm to set up a European research centre after Tata Motors, plans to access both top talent and the latest in automotive technology in order to design products for developed markets like North America and Europe.

Most likely to be based out of the UK — a final decision is expected in the next few months — this new development centre is expected to initially have 120-150 people with a focus to develop a car completely from scratch. This new development hub will complement M&M’s recently set up research & development (R&D) base near Chennai. M&M also has a small technical centre in Detroit, which largely focuses on tractors.

“The product development centre will primarily be for Mahindra products, because Ssangyong already has an ecosystem in place. It should take six months to a year to be operational once the final decision is taken. It is a question of extending our R&D with some kind of arrangement, maybe a company or subsidiary — we have to decide that. We are looking at the UK in a big way, but also France and Italy,” Rajan Wadhera, M&M’s chief executive for technology, product development and sourcing (automotive & farm equipment sectors), told FE.

He added, “You have to be there if you want to be global and we need it for capability building. We want to be part of an ecosystem that is fully developed. They (in developed markets) have been working on cars for 100 years and we only have 10 years of experience. We don’t have the talent here, we won’t be able to scale up.”

Recently Mahindra group chairman Anand Mahindra also acknowledged the importance of global expansion. “Globalisation is a necessity. You’re not safe if you’re not competitive abroad, because the global players are at your doorstep. You need to access the sources of knowledge that global companies are able to do. There are certain large markets where we have to make large bets,” he said.

M&M currently sells a variety of its models like the Scorpio (sold as the Goa), a Scorpio-based pick-up and the XUV500 in Europe — in fact, the XUV500 was the first product developed with a global audience in mind. The company also exports to Australia, South America and African markets. Though its primary manufacturing plants are in India, it has assembly plants in Brazil, Tunisia and Egypt and is reported to be looking at more such assembly operations in Southeast Asia and Africa. For its tractor business, M&M has two joint ventures in China, four plants in the US and one each in Australia, Chad and Mali.

It also controls South Korean SUV specialist Ssangyong, a brand that has progressively done well after M&M acquired it in 2011. Ssangyong, which recorded highest-ever sales since 2005 this October at 14,244 units, has already seen overall volumes rise 21% to 1.04 lakh units between January and September 2013. It also reported its first quarterly profit after six years in the second quarter of the current fiscal of 6.2 billion won (Rs 36.6 crore), following up with another profit of 1.5 billion won (Rs 8.8 crore) in the third quarter.

At home, M&M has had a good run this fiscal on the back of strong tractors sales, though diesel-powered UV volumes declined — M&M’s profits in the second quarter went up 10% to Rs 990 crore. The company is restructuring the rest some of its loss-making auto subsidiaries (two-wheelers and commercial vehicles) with a view to turning them around through cost savings on the back of group synergies.

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