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Mahindra unleashes Scorpio with `aggressive' pricing

Our Bureau

Mr Anand Mahindra, Vice-Chairman and Managing Director, with the Scorpio

MUMBAI, June 20

THE domestic automobile market could be headed for some action with Mahindra & Mahindra Ltd (M&M) disclosing an aggressive pricing for its new `Scorpio' sports utility vehicle (SUV).

Unveiled in both petrol and diesel versions, the Scorpio is priced ex-New Mumbai at Rs 5.5 lakh for the Euro 1 Diesel Turbo 2.6 and Rs 6.1 lakh for the Euro 1 Diesel Turbo 2.6 DX. The Bharat Stage 2 models are priced ex-New Delhi at Rs 5.82 lakh and Rs 6.35 lakh respectively, with the petrol model (Renault engine) priced at Rs 7.19 lakh.

A new Scorpio variant, sporting a naturally-aspirated engine and costing Rs 5.2 lakh ex-New Mumbai, is due over the next few months. All models unveiled by M&M on Wednesday were 2-wheel drives. The 4-wheel drives are expected within 10 days.

"It is a very aggressive pricing and makes the Scorpio the best value for money vehicle in its segment," Mr Hormazd Sorabjee, Editor, Autocar India, said. Existing competition for the Scorpio, given the features it comes with, include the Tata Safari and the Toyota Qualis. Besides its smart looks, the Scorpio is seen to score on the power front.

The buzz at M&M's sales team on the potential scenario does not focus much on the Safari, since this high-priced SUV sells in small numbers. What they have their eyes on is the Qualis and customers wooed away from the mid-size segment of the car market.

Industry observers kept their fingers crossed on a potential price war similar to what happened when Tata Engineering's Indica was launched, for the simple reason that the Safari was always positioned as a premium SUV and Toyota had a reputation for holding its price. Equally, it remains to be seen how long M&M will maintain the Scorpio's price tag.

At a press briefing at M&M's Nashik plant today, senior company officials — including the Vice-Chairman & Managing Director, Mr Anand Mahindra, the Executive Directors, Mr Alan Durante, and Mr Bharat Doshi — said, the Scorpio was hoped to forge its own segment expanding the country's nascent SUV market. Mr Mahindra said he believed the SUV segment of the UV market exceeded the official industry estimate of 4.5 per cent.

M&M is slated to manufacture at the rate 600 Scorpios per month by July and reach 2,000-2,500 units per month "over the year." This ramp-up will be cautiously done as product quality needs to be ensured.

They did not see the Scorpio's pricing as a threat to the Bolero's sales, there being still adequate gap between the two. While variants from now on will be based on the new Scorpio platform, officials said the issue of extending the use of the Bolero to M&M's semi-urban and rural markets, with suitable modifications for the purpose, was being examined.

M&M has said it wants to take its market share in hard tops from the current 34 per cent to 45 per cent in three years' time. Last fiscal, roughly 1,17,000 utility vehicles were sold overall. At Rs 4 lakh a piece, the market is worth more than Rs 4,500 crore.

"You have to take a call on the price," Mr Gautam Nagawekar, Vice-President (Sales), M&M, said, when asked if the Scorpio's aggressive pricing could mean a longer break-even for the Rs 550 crore-project. Senior officials emphasised that Rs 300-crore investment was for shared facilities, its recovery helped by volumes other than Scorpio's. Further, the financial restructuring M&M did in 2001-2002 also lowered break-even levels, they said.

Though an official did say that issues such as minimum cycle time during shift from one model to another on flexible assembly lines were still under study, industry analysts pointed out that unlike cars, utility vehicles were not technology-intensive. Yet by virtue of their appeal, their prices fetched higher margins, making the business that much less volume-sensitive.

The Scorpio rollout is in three phases. In the first phase, 45 dealerships are covered, in second 30 and the balance in the third phase. Though urban markets will be its mainstay, M&M is open to any of its dealers handling the Scorpio, provided sales standards are met. As they see it, quality is sought by all customers — urban or otherwise.

However, as the marketing strategy targets positioning Scorpio as a classy brand by itself, M&M's name featured merely as an assurance of pedigree and support. This distinction between the Scorpio and Mahindra brands would be driven by the visual perception of a model and not by price or the platform used, Mr Rajesh Jejurikar, Vice President (Marketing), M&M, said.

"The ultimate test for the Scorpio is to make a mark in overseas markets," Mr Mahindra said. M&M has its eyes on Georgia, Russia, Indonesia, Brazil, South Africa, Malaysia and China. He had stated in a recent interview that M&M was open to co-operating with any global automobile company if that catalysed market access.

Each market would be tackled in its own way, officials said, when asked about maintenance of the brand, format of market entry and the impact it had on future investments. "Including the farm equipment sector, our capex for the next few years would be Rs 150-200 crore per annum," Mr Doshi said.

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