Hope Budget will rationalise excise to shore up demand: Pawan Goenka

Mahindra & Mahindra is now India’s largest seller of passenger utility vehicles thanks to products…

Mahindra & Mahindra is now India’s largest seller of passenger utility vehicles thanks to products like the XUV500, Scorpio and Xylo. But the launch of compact utility vehicles by the likes of Renault and Ford has seen the Anand Mahindra-led firm lose some of its dominance. Pawan Goenka, president of M&M’s automotive and farm equipment business, in an interview with Aveek Datta, says the company’s new launches in the segment will be critical to regain market share and explains how it is working to make Ssangyong the next big Korean car brand in India, after Hyundai. Excerpts

How have auto companies coped with the downturn in the Indian economy over the last couple of years? What is the future outlook?
We are witnessing a very fragmented recovery in the domestic market. The sporadic growth we saw in the last couple of months has been primarily driven by new launches and heavy consumer schemes. While the passenger and M&HCV (medium and heavy commerical vehicle) segments have shown signs of revival, the light commercial vehicle (LCV) segment continues to de-grow. Investments in infrastructure and agriculture will help revive the economy, including the automotive industry. We also hope that the Budget will rationalise excise to help generate and sustain demand.

What are the biggest challenges facing the auto sector and what can be done to address them?

The rollback of excise duty reduction has definitely had an adverse effect on the industry. Further, with demographic changes and constant evolution of customer expectations, the auto industry faces increasing complexity. There are ever-increasing options, leading to smaller product lifecycle and greater pressure to innovate, to stay in the race. Any deceleration in economic activity, policy uncertainties and spiraling interest rates affect consumer and business sentiments. We do hope that the upcoming Budget has some positive news for the auto sector.

What are your near-term plans for the utility vehicle segment, considering you have lost market share in the segment recently?

We were slow on launches in 2013 and 2014. This year, we will launch two sub-four-metre compact SUVs and an LCV. All three would come on completely new platforms. We are also in the process of developing a new series of engines with SsangYong.

How big a role will compact utility vehicles and Ssangyong play in this strategy?

The most important pillar for us this year will be new launches. Currently, we are not present in the UV1 segment of compact SUVs and, hence, our new launches in this category will play a critical role, considering the shift in customer preference towards the segment.

SsangYong is an important part of Mahindra’s automotive business. There are obvious and major synergies in two similar automotive businesses collaborating on products, aggregates, sourcing and technology developments while maintaining distinct brand identities.
We have a number of areas in which Mahindra and SsangYong are working together, deriving savings. These include joint sourcing and joint product development. Currently, we are jointly developing six engines, both petrol and diesel. Going forward, we would like SsangYong to become the second Korean brand in India.

What steps are you contemplating to increase market share in the two-wheeler segment?

The national launch of the Gusto, Mahindra’s first ground-up scooter developed entirely in-house, has met with an enthusiastic response from customers across India. We now have a reasonably sized product portfolio in the mass segment with the Centuro and Gusto. We will be, over the next few months, focusing on growing volumes.

What are the reasons for softness in tractor sales? When do you see numbers picking up?

The tractor industry has been going through a difficult phase and continues to witness de-growth due to negative market sentiments, caused by factors such as delayed rains, poor crop yield and reduced disposable income. We are hopeful that the situation will improve in the next few months. Although the domestic market is sluggish and sales are falling, Mahindra has maintained its overall leadership position in the category.

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