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M&M has fashioned a three-pronged strategy for the automotive sector — passenger cars, commercial vehicles and utility vehicles.
“We will never do a car project by ourselves,” says Pawan Goenka, president of the automotive division. “It will always be in partnership with a carmaker such as Renault.” The passenger car business is essentially a marketing tie-up where M&M will use its distribution network to supply cars in the market. It will not even make them.
In the commercial vehicles segment, the company has a JV with International Trucks (ITL) — Mahindra International (MIL) – which will develop a complete range of commercial vehicles. The parent M&M has a non-compete agreement with ITL under which either company will not tie up with anyone else. However, MIL is free to forge relationships on its own. The company’s entire focus would be on SUVs, MUVs, and pick-ups. “That is where we are focusing on building a global brand,” says Goenka. M&M will develop vehicles and market them independently in that segment.
Currently, it is working on three new platforms. The first one to hit the market by mid-year would be the Ingenio. “However, it is unlikely to be called the Ingenio. That is the project name,” says marketing head Rajesh Jejurikar. M&M is also working on Project W201; a monocoque SUV, to be positioned as a premium vehicle, above the Scorpio. “It would have a completely new common rail diesel engine with cutting-edge technology not yet on the road anywhere in the world,” says Goenka. It is expected to be launched in 2010. The third platform is an MPV about which Goenka remains tight-lipped.
Goenka says that the company plans to create new platforms at a faster clip. In fact, that is an objective stated on posters all over the company – “We will develop three new platforms in the next four years”.
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In 2002, the Scorpio set out on the path of pioneering all-terrainers, such as Chrysler’s Jeep Cherokee and Land Rover’s Defender. These vehicles had been the choice of outdoor enthusiasts, armies and organisations that needed utility vehicles ever since they were launched just after WWII. But in the 1980s, when SUVs became cool and manufacturers padded them with creature comforts for soccer moms, the prices of the Defender and Jeep zoomed. With the 2007 Defender costing about $42,000, Mahindra gambled that its buyers would be hungering for cheaper alternatives.
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FIRST OUTPOST M&M has learnt its global lessons well in South Africa, a microcosm of
the world market with a strong presence of big players |
His hypothesis was first proven in South Africa. “We were looking for a reliable vehicle that could perform like the Defender but was not as expensive and found that Mahindra vehicles fitted the bill very well,” says Ivor Ichikowitz, executive chairman of the Paramount group, which has been supplying tailored vehicles to police and armies in most African countries for several years. When Ichikowitz saw M&M’s vehicles he was so delighted and excited at their possibilities he became the junior partner in a 51:49 joint venture with Mahindra focused on selling the company’s UVs and ‘bakkies’, as the pick-ups are called in Africa. So far, the JV, which sells Scorpios, Scorpio pick-ups and Boleros, has sold close to 9,000 vehicles in South Africa over the past three years. Last year, the South African operations brought in Rs 301 crore.
Vijay Nakra, the sushi-loving CEO of Mahindra South Africa, says the rainbow nation was also crucial for M&M because it brought the company face-to-face with global competition for the first time outside India. “The SA market is like a microcosm of the world market,” says Nakra. Five of the world’s top carmakers — Toyota, Volkswagen, General Motors, Ford and Nissan — control three-fourths of the South African market. Adding to the competition are cheap Chinese imports, such as Geely and Meiya.
Sonja Kee, a chicken farmer from the largely bush country of Bela Bela, 65 km from Pretoria, says she apprehensively bought a Scorpio last year because a dealer, Michelle Venter in Pretoria, persuaded her to try it. After doing 30,000 km in a year she is a convert. “I used to drive Toyotas. But now I will not switch,’’ Kee says as she watches Venter’s employees give her Scorpio a power wash.
Part of the reason for such success is what P.N. Shah, M&M’s head of international business, calls RWUP or real world usage pattern. This considers the tastes and requirements of customers in different markets and incorporates them into the product development process so that the final vehicle can be launched in different regions of the world with minimal tweaking.
Eager-to-sell dealers are also helping M&M widen its footprint in South Africa. Nakra says that the company went for a combination of dealerships. While major dealers, such as McCarthy, one of the biggest in the country, have allocated separate space for Mahindra vehicles, M&M has also tied up with a host of used-car dealers with entrepreneurial spirit. Now many of its 40 dealers are such entrepreneurs who exclusively sell M&M vehicles.
In fiscal year 2008, M&M exported 12,000 vehicles to South Africa, Europe, Chile, Brazil, Egypt, Nepal and Sri Lanka through 350 dealers, over 100 of whom were in Europe.
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