Logan, the first passenger car from the Mahindra & Mahindra (M&M) stable, has got off the blocks in style by becoming the leader in its segment within three months of its launch. Logan sales have contributed significantly to M&M?s total sales in the last quarter, at a time when automobile sales were sluggish. And going ahead too, the JV companies (Mahindra Renault ? the alliance between M&M and Renault of France and Mahindra International? M&M?s JV with International Truck and Engine Corp (ITEC) of the US) will play a key role in M&M?s growth.
Aware of the tremendous synergies coming out of these JVs, the company is clear about its growth path. It wants to reinforce its own brand and become a global major in its core areas of utility vehicles (UVs), pick-ups and light commercial vehicles (LCVs), by driving the brand M&M globally. The company has decided to grow on its own, in areas where it has a strong presence (UVs, pick-ups, and LCVs). In areas where it has no presence, it is growing through alliances: for passenger cars with Renault and for medium and heavy commercial vehicles with ITEC.
Pawan Goenka, president, automotive sector, Mahindra & Mahindra explained to FE,
?We want to be a global player and want to be known as Mahindra & Mahindra rather than the JV partner of another company. For that, we would have to develop products on our own. If we don?t, then we would just become a joint venture company and in 10 years? time, would not have our own identity.?
Though the history of Mahindra & Mahindra goes back six decades to the days of manufacturing Jeeps, it is in the last three or four years that it has created a mark for itself in the growing Indian auto industry. It has reached a position where it is capable of taking over an international major. The company was reportedly bidding for the marquee brands Jaguar and Land Rover from the Ford stable recently.
Till just a few years ago, Mahindra & Mahindra was better known as a utility and tractor leader. It is in the year 2005, that the company announced its entry into the highly competitive passenger car and commercial vehicles segment by signing important back to back joint ventures with Renault and ITEC, which transformed M&M into an integrated automobile major in India. These JVs and tie-ups not only expanded the company?s product portfolio, but also offered a wider global reach for future growth.
Apart from this, M&M also entered into a unique three way tie-up with Renault and Japanese auto major Nissan in 2007 to set up a manufacturing facility in Chennai with an investment of Rs 4,000 crore, making it the largest automotive venture in the country.
Says VG Ramakrishnan, director – automotive and transportation practice, Frost & Sullivan, ?M&M is very clear as to what it wants to do and what its positioning should be. The company wants to be a full-fledged automobile player and at the same time, does not want to deviate from its core areas of manufacturing utility vehicles. Its JV partner Renault was very keen to enter the very competitive small car segment with M&M, but Mahindra realised that its competencies do not lie in that area and decided to opt out. It is focused on its path and has already announced the launch of Ingenio and a high-end SUV on its own.?
The company is planning to invest Rs 6,400 crore towards expansion of capacities, investment in research and development and product development in the next three years.
It has also announced plans to develop two new vehicle platforms alongside the development of the MUV, Ingenio. It is working on the upmarket SUV platform and mass-market cargo and passenger vehicle (LCV) platform. The company would be investing Rs 600 crore each in these two new projects.
M&M would be first launching Ingenio from its Nashik Plant, followed by the mass market cargo and passenger vehicle (from Pune plant) and the SUV platform from the forthcoming Mahindra Renault Nissan plant in Chennai.
Experts feel that there are a number of things going right for M&M, but there are some stiff challenges ahead as well. If M&M truly wants to be a global SUV leader, it should be able to develop more products and that too, within a short space of time. Ramakrishnan says, ?Mahindra as a company should be looking at one product after the other, reducing product lifecycle, cutting the time between two launches and also ensuring that each of the products make money.?
Till June this year, M&M had already rolled out two million vehicles with one million of them coming in the last decade or so, indicating the rise of the company as a major auto player. Over the last 60 years, volumes have grown at the rate of 9% per annum; CAGR in the last few years has been around 22%.
M&M is a leader in the UV segment with a market share of over 45% and is the second largest player in the LCV segment.Goenka feels the company has enough competencies in these areas of UVs and LCVs to develop world class products on its own and compete with the best in the world. Says Goenka, ?The roll out of two million vehicles is an indicator of our exponential growth in the industry as an automaker.?
Going forward, exports will play an integral part in the growth strategy of the company. Currently, exports contribute merely three per cent of its total production, but with expanding footprint and the international distribution network of its JV partners at its disposal, the company is bullish about the export market and is targeting a 20% contribution from exports in three to four years? time.
M&M has been exporting lifestyle and SUV products under the Bolero and Scorpio platforms and have created a niche for itself in Africa, especially South Africa and in European countries like France, Spain and Italy, by adapting unique business models for different regions. South Africa is the biggest export market for M&M with over 50% of its volume coming from the region. Through its 100% subsidiary Mahindra South Africa, the company is also looking at tapping the surrounding countries of Botswana, Swaziland, Lesotho and Namibia, through the Southern Africa Common Customs Union (SACCU). The company is coming up with two plants in Egypt and Brazil which would serve Africa and South America.
However, here too, the company needs to come up with more products to offer a wide portfolio to international customers. Says Ramakrishnan, ?The Scorpio is the only product that has done well on the international platform. If you look at other SUV manufacturers around the world, they offer a plethora of products within their SUV segment. If M&M wants to grow globally, it will have to create a segment for itself and should be able to offer customers more products. That is the biggest challenge for the company.?
