M&M prepares the base for new businesses

Mahindra & Mahindra has had a good run with its SUVs and pickups but is only too aware that this will not last forever.

“We are in a happy and profitable position right now. We are, therefore, creating our future through trucks, electric vehicles and SsangYong,” Pawan Goenka, President (Automotive and Farm Equipment Sectors), told Business Line .

From M&M’s point of view, this is the time it can afford to invest in these segments thanks to pickups and SUVs which will do well for the next couple of years at least. “We are now laying the base for the new businesses to start delivering thereafter,” he says.

In trucks, M&M recently parted ways with Navistar of the US. This has come at a time when the commercial vehicle industry is hardly in good shape with companies reporting a dramatic fall in sales each month.

Goenka, however, chooses to look at the bright side. “If we look at our trucks business, we would have been worried with a dud product. But that is not the case since customers have no issues with our trucks which are reliable and comfortable,” he reasons.

M&M also believes that while the CV industry is going through a low now, this is inevitable in any business cycle. As and when the turnaround happens, the company is hopeful it will help improve its market share from 2.5 per cent to eight per cent which will give it the critical mass.

“Given that it is a good product and this is a flexible business model with a solid brand in Mahindra, I am not overly concerned. We will set out to deliver what we want to do over the next three years,” Goenka says.

Electric car

Likewise, the electric car is scheduled to debut soon after the Budget and will soon pave the way for this concept to extend to other M&M products. Though dramatic growth is not expected in this product segment, it is still an important step especially with prices of petrol and diesel going through the roof.

M&M is also betting big on SsangYong which it acquired a couple of years ago. While it reported good growth in 2012, the Korean automaker is still not out of the woods. According to Goenka, the challenge lies in the fact that a lot of its volumes come from exports where many of those markets have not grown.

The SUV segment, going forward, will not be a cakewalk for M&M as more rivals enter the arena. Yet, it will continue to be top priority simply because it supports the various businesses. “We have to control costs, update products and launch new ones. We just cannot take our eyes off the SUV space,” Goenka says.

Tough fight in SUVs

The company believes that a key source of its strength is product development where investments continued even in bleak years such as 2008-09.

“Had we stopped then, we would have never been in this position. I also think a lot of things we have done over the 18 months will begin to mature for us in the days ahead,” he adds.

This will involve hard work in a far more competitive market. For instance, there was really no selling effort needed for the first year of the XUV 500 but the challenge for M&M now is to sustain the pace and snare over 4,000 customers every month. “We are increasing our marketing effort and are upbeat about the road ahead,” Goenka says.

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