We Are Launching Our First Electric Vehicle In Q4 Of 2019 - Rajeev Chaba
Right before unveiling its first product in the Indian Market - the MG Hector, Rajeev Chaba President & MD of MG Motor India talks to Siddharth Shankar from BWAutoworld about how MG Motor is handling the challenging Indian Automobile Market.
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Rajeev Chaba, President & MD, MG Motor India
Morris Garages (MG) Motor, the iconic British brand, now part of Chinese automaker SAIC Motor Corporation, is finally ready to unveil its first Product for India - The MG HECTOR. In an interview with Siddharth Shankar of BW Businessworld, Rajeev Chaba, President and Managing Director, MG Motor India, shared more on the future plans. Excerpts:
From Leading General Motors to Establishing Morris Garages in India, How has the journey being so far?
Mr. Balendran and I had joined MG Motor India as starting founders a few years back and we accepted this challenge because we thought lots of things can be done in a different ways in this country and there was an opportunity to disrupt the market because you know how things are being done in the industry and there is scope of improvement. But it's very difficult to make those changes in an ongoing organization because you know, there's a huge legacy in everything. Whatever we do in the automotive industry, there are deep-rooted relationships, whether at the dealer side, supply chain side or the manufacturing side. But when you're starting from scratch, the opportunity is that you can challenge the myths and a lot of existing practices. It was exciting to start something from scratch and do things the right way. So far the journey has been very rewarding. We started as a small group, and now we got the plant from GM in September of 2016 then along with getting the company registered we started to finalize our product plans along with the localization. We also got the teams in place with a lot of renovation happening in the plant which is almost complete right now. We have changed this plant completely from what we got from GM at that point of time. Now, we have got a new press shop along with a new vendor park and a modernized paint shop. We have completely changed the administrative block. So lots of things including greenery of the place the ecosystem the trees. If you now visit our plant and compare it with its prior version, it is completely different which has given us a lot of satisfaction because it was an old plant.
On the other side, recruiting the sales and marketing team, overviewing the dealer's process, investing in a dealer management system and investing in our website management system. All these have been a great learning path. We are going to do a lot of things in a different way.
There are at least 20 odd players in the market and three players command 75% of the pie. So what difference will you bring on the table?
When I say we want to do things in a different way, the primary reason for that is we know that our job is very difficult. Three players contribute 75-80% of the market share and most of the other players are fringe players despite the fact that they have been in this market for 10-20 years. So, why would we be successful? The job ahead is very tough. But in order to do it, we know that on all the pillars of success, we need to do things in a different way. What are these pillars?
One is obviously the product side. Which includes the styling, its features, cost price, almost everything. The second is consumer experience. The consumer experience is very good and important because that takes care of your dealer side of issues. How do you handle the customers and process their claims? And how do you take care of customer satisfaction? Here, you need to do things in a different way. The third part also is very important which is product assurance. When you purchase the car from a dealer, he takes care of the things. But the product assurance part includes your cost of ownership. It includes resale price, warranties and after-sales issues. So those issues are equally important and we are working on all these three pillars smartly. We want to make sure that not only our product is compelling but a benchmark in the industry.
So on the product side, we are quite confident and based on that localization and some other supply chain integration, we are able to achieve. I'm not saying cheap or less but it should be competitive within the industry. On the other side of consumer experience and customer insurance, we have got a good start with the right set of dealers. We have been very careful about choosing the right profile of the dealers and here the commitment happens both ways between us and the dealers due to which we get good customer satisfaction while ensuring profitability. So that's the kind of a philosophical understanding. It means that we have taken a conscious call.
Dealers are having a lot of problems with OEMs, How are you working on this?
We choose a few numbers of dealers and allow them to grow with us rather than having multiple dealers. This is one of the big issues in most of the OEMs right now and historically it is difficult for them to correct. But because we are new we can take that call. So as an example, we are starting with a hundred sales and service points, but the dealer principals are only 50. So suppose after five years, we need 500 points and we don't have 500 dealers. We may have only another five or ten dealers and these 50-60 dealers will grow. So you have to take care of the discounting and dealer viability issues. Also, one important thing which we are challenging in this industry is a huge inventory mismatch. The reporting is done on a wholesale basis but what you produce from the factory and shipped to the dealer's is not retail. But because we are starting from fresh and we are very clear that we don't want to dump inventory at dealers. We want to take care of the dealers' viability impacts. So we are not going to talk about wholesale in our company. We are going to talk retail which is what exactly is being sold to the ultimate consumer. So these small things bring big philosophical changes while ensuring the dealer viability wherein the dealer takes care of the customer. It all starts in an inverted pyramid in which I think we need to take care of the employees first. Satisfied employees take care of satisfied dealers and satisfied dealers take care of customers. And that we are trying to do is to build the right culture in the company so that the employees feel very happy and motivated. Then they take care of the dealer while securing customers. We know what has to be done and everything depends on execution and we know that execution is not easy, especially in our country. There are lots of challenges such as dealer manpower quality and their training and those issues are there but we are cognizant of these challenges. We have got some plans. Now the proof of the pudding is in good execution. And also the fact that competition is not going to sit idle, the competition also is tough and there are some very strong players with a strong proven record. So our job is not going to be easy and I could be the first person to say that.
A few years back you had talked about a Rs. 5000 Crore Investment
We got our plant on September 16, 2017. And it has been only 16 months and in this period we had to renovate the plant. We had to localize the product and now we are almost ready with the product right now. It is a tremendous job done by the team and the whole ecosystem. Coming to the point about the investment, we have already committed that we will invest 5,000 crores in phases. In the first phase as of now, we have already done more than 2200 crores.
Over a five-year time period, we will be investing about 5,000 crores in a phased manner depending upon the product programs. So our 2,200 crores is largely for CAPEX for those manufacturing facilities and product engineering cost because there's a lot of engineering costs and product prototypes. So it's all basically launch readiness and product engineering cost. It's the manufacturing cost and a lot of other expenses related to the launch.
Morris Garages as an iconic British Sports Car Brand, Is this brand image helping you?
MG is a 94-year-old British brand and they have been a very iconic brand primarily into sports cabriolet and in convertibles. That's the beauty of the MG brand! A lot of cars were exported globally, especially to America and also thanks to our good times earlier wherein lots of cars came to India. In fact, as we speak, we know that around 500 vintage cars are there in India with the majority being in Calcutta, Rajasthan, Delhi, and Mumbai. However, this brand ownership has been changed multiple times in the last 50-60 years and it is changed the hands from Leyland to BMW and to SAIC.
So SAIC happens to be the owner of this brand and the good news as I see it has got the resources and technology to take this brand globally and that's what they're trying to do. So in this new Avatar, MG is trying to be pretty serious to become a global player. Already we are present in 35 countries and then it also matters that what kind of portfolio you want to have.
When do we see a Convertible from MG Motor?
Convertibility is our DNA and so from that perspective, we have already introduced the concept car in the Shanghai Motor Show. Last year, we were going to have a convertible electric vehicle on an MG for the global market. But it is yet not finalized for India and it has got gullwing doors, It is an electric vehicle and it's there. So I think we are taking the earlier definition of MG Motors to the present and to the futuristic definition to make it more meaningful if I may say.
Do you plan to set up a R&D Center in India ?
When you are trying to expand into various countries, you need to take care of the consumer requirement, road conditions, homologation and the regulatory requirement of that country. So that's why we are using a mix of Shanghai and UK Design Center. We have got a big R&D lab in Israel and Silicon Valley. We have opened a new engineering Centre in the UK also. We have just opened a new design center in India. In India, we have got a battery of Engineers now, you can call it our own small engineering Centre with lots of equipment to take care of, along with a lot of local roads, testing local parts testing, etc. So it's a combination of various engineering centers including R&D and design centers collaborating for one product for a particular country. So India also is no exception and we are getting help from all these centers globally. But as we go forward, we all know and are very proud of the fact that in India engineering is quite competitive. Price-wise, skill-wise, and capability-wise. We will be increasing the engineering load more in India as we go forward. It is a step-by-step approach, but I will not rule out the setting up of a good engineering center as you go forward with more and more capabilities in the times to come.
So everything has been designed developed in UK right now or in shanghai?
If I can just break the physics of the car into few components - one is the platform, So you choose the right platform, where you can create depending on which segment you want to come in? And the right cost structure of the car you want. Then on the platform, you have the skin of that brand that you want to put in. With MG because it's a British brand, the British designers play a big role in designing and then in deciding that this the design language of the car. From a design perspective, British designers are putting in a lot of design elements, Depending on the platform chosen, the platform engineers work on the engineering and the local guys provide the changes required on the platform to suit the local needs and local consumers. The end product is a collaboration between the three engineering center family.
Earlier you have said that MG will have an electric SUV by 2020, how challenging will it be to crack the EV Market because it has not yet gained traction?
In terms of Electrification, the difference between India and China is that Chinese guys decide and move very fast. While we are still at the policy stage right now. We are still at the deciding stage and there's a lot of noise in the system people are talking, people are collaborating which is natural. It's a natural process for any policy decision because the different voices from different stakeholders depending on certain agendas that people have got. I think we are going through that chaotic phase of policymaking, We need to reduce our dependence on oil. The Government knows we need to be more friendly towards the environment. Even the courts are talking about that, they want to focus more on two-wheelers, three-wheelers, commercial vehicles, buses and then private cars. So from the government’s perspective, they are right from OEMs prospective like us we are saying that yes, that's right, but don't forget private cars. Don't forget the charging points requirement for private consumers.
We have decided to take the plunge right now because we have the technology available. We have the right technology at the right price, I think. We have the right product available, I think consumers in India will like it. We want to work with the government and collaborate with the charging infrastructure companies and go through this learning curve together. We have taken a conscious call to do that and be upfront in this game. We could have waited like many other companies for two-three-four years, but we are ready. We are going to launch this car end of this year and I think consumers are really going to love our product. Did you say 2020? We are launching the end of this year.
This year MG will bring an Electric Vehicle?
Yeah, we are launching our first Electric Vehicle by the end of this year, Q4 of this year. We are quite serious about the entry Electric Vehicle on one hand. We know it's very challenging, execution is the key on the other hand from the company's perspective, we are very clear about the long-term strategy, so we are trying to get the right foundation in place. It's serious.
Are you confident of disrupting the market with Hector?
We don't want to overcommit and under-deliver. I think in a few days everyone will come to know why we are quite confident about our offering.
So will you be also looking at exporting overseas Markets?
It is too early for us to discuss the export as I said, our focus is to have a great foundation in this market. This Market is huge anyway, but we will not rule out exports from India. But at this point of time at least in Phase 1 which is this two year kind of a strategy we are not thinking of export but yes, the neighbouring countries like Sri Lanka and Bhutan and Nepal there we would be exporting it right but not to Europe or to some other country at this point of time is too early to talk about them. Our priority is to consolidate our position in the India market.
SAIC doesn't have many diesel engines in its portfolio. They specialize more in petrol. So will you be looking at sourcing diesel engines from other manufacturers?
We need to see what is the potential of diesel engines in different segments. With BS6 coming in next year and BS6 phase two coming in in 2023 the diesel penetration is going down drastically. The high-end big cars big SUVs, Diesel still may be relevant but the relevance is going down but at the same time wherever it is required, we would have a diesel engine but most of the segment's I think in next one or two years’ time diesel engines customers will not go for diesel engines and the percentage will go down. We are seriously looking at GDI engine technology which is like the direct gasoline direct injection engine. We are looking at hybrids, mild hybrids. Which are still very good solutions to replace the Diesel engine? Even in Hector, we are thinking of some smart Technology Solutions So you can expect very highly efficient petrol. You can talk about hybrids from our side and wherever diesel is required, which is like very few segments. We would have a diesel of In-House developed engine starts. We have an in-house diesel engine also in saic on the high-end SUVs.
With MG marketing HECTOR as India’s first Internet Car, could you tell us about your partnership with Startups?
SAIC has committed five billion dollars in R&D investment on connected car ride-hailing and EV, batteries and charging. So luckily we have got that kind of strength available in our parent company and we would be using that here in India. On the Innovation and the technology side, we started working with some startups. Within two months of taking over the plant. December 2017. We just had a tie-up with a tie in style organization here. And then we had a competition among the startups and we shortlisted five startups and we kind of mentored and supported did some hand-holding of those startups with the idea that we need to get into the new age Solutions in Mobility. We didn't stop there, we have been doing regular hackathons. We have done a hackathon in Baroda and Delhi. We have done a tie-up on the GPS geofencing project with IIT Delhi this year. In this whole startup space, we are quite active in Community Development without selling a single car We have done safety training initiatives in a hundred fifty schools in Gurgaon and Faridabad today. We have just signed MOU with an NGO. It is not CSR, We're not selling any car. It's just a community development program that with every car sold We are going to spend some money per car in poor girl child education. We have just tied up today with 30 such School centers for a thousand girls education this year, next year it will be more.
if you go to our website we call it the consumer customer cloud experience the customer cloud experience here we have gone the best possible solution globally and we have collaborated with Adobe. So the whole consumer experience cloud is going to allow us to do a lot of things like consumer analytics, the response time for the consumer from our website, the whole interaction with our website. I think and we are the first company in India to go for the whole Adobe suite with Adobe. Adobe Global Leadership is supporting us, they are looking at this initiative very closely and they are supporting us. We also have gone for the SAP solution and my team leads me to believe that our web management system and Cloud experience is going to be the best in the industry.