Pawan Goenka, executive director and president of M&M’s automotive & farm equipment businesses, told FE, “We are very interested and keen to own a marquee brand because the auto business is to a large extent a brand business, much like FMCG. Today, a near-identical product branded differently can fetch an altogether different price, such is the value of the brand.”
Goenka added, “When you pay R25 lakh, you’re paying not for the machine but for the brand. That’s the game Mahindra has to play. In 20 years our brand has come a long distance, but it is nowhere a job done — that is still a generation away”.
This is not the first time that the Mumbai-based M&M has evinced interest in acquiring a premium brand, though it hasn’t been able to lay its hands on one. In 2007 it pitched for Jaguar Land Rover when Ford was doing a distress sale — the brand was picked up by Tata Motors. More recently, in 2012, M&M was reported to be in the running for General Motors-owned Swedish car brand Saab and later had shown interest in British niche sportscar maker Aston Martin.
“Premium brands are nice to own but it’s difficult to make money from them because the fixed costs are high. The auto business is a very difficult one and it’s not easy for companies like Tata and Mahindra to make a mark in the global arena given the kind of spends needed on technology,” Goenka said.
M&M plans to position Ssangyong more in the luxury segment over time in India, while the Mahindra brand itself will move towards the premium market. Ssangyong, which M&M acquired in 2011 and turned around in 2013 with record sales of 1.45 lakh units, is also expected to see a re-branding both because the name is tough to spell and because the brand is associated with negative connotations like labour strikes in South Korea. M&M has appointed Strawberry Frog, a New York-based creative agency, to take a look at the group’s re-branding strategy.
“We are hoping that Ssangyong will also take the Mahindra brand to a higher level in India. With Mahindra we hope to go beyond the XUV500 price point slowly as we take the brand higher and higher. Today, if Mahindra was to launch a R50-lakh product, no matter how good it is, it probably will not have the impact,” he said.
M&M has seen its passenger vehicle volumes drop 17.5% in April-December FY14 to 1.87 lakh units because of subdued demand for SUVs after excise duties were increased earlier this year and diesel prices were hiked several times. M&M shares on the BSE closed 1.52% down at Rs 893.50 on Thursday. The benchmark Sensex was down 0.08%.