Mahindra & Mahindra Struggling to Push ... - China Car Times

The below Reuters report is largely correct, aside from Ssangyong?s placement as a high end brand. Ssangyong to Chinese consumers was never really a high end brand, it was a quirky SUV maker with noisy diesel engines and expensive spare parts. The best selling Ssangyong was the Kyron and the later Actyon, but once the novelty of having an SUV that looked like a shark crossed with a sports coupe wore off, Ssangyong?s Chinese sales shrivelled, and then came the SAIC pull out, followed by a lack of new models. In fact, the Actyon sells for just 160,000RMB to 230,000RMB ? hardly high end considering the most basic Jeep Compass sells for 220,000RMB and rising.

Mahindra & Mahindra is finding it tough to exorcise the ghosts of failed Chinese ownership at its South Korean car unit Ssangyong as it looks to push the brand into China?s auto market, the world?s largest.

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.?

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