An iconic British brand would have been the icing on the cake in M&M’s brand-building process.
In the golden jubilee year of James Bond, it was a remarkable coincidence that his trusty companion, Aston Martin, was put up for sale. And even more remarkable was the fact that it was an Indian buyer touted as the top favourite to acquire the brand.
Well, by the end of the day, Mahindra & Mahindra did not make it and Aston Martin is now in the hands of an Italian PE investor company.
We will, perhaps, not know the complete story on what eventually skewed the balance, but it has been an engrossing drama since the news broke out early last month.
What is it about Aston Martin that was so attractive to M&M? In terms of numbers, the company’s annual sales are barely 5,000 units, understandable for a top luxury brand. It was also bogged down with its share of debt.
Observers argued that it hardly made a comfortable fit with a hardcore utility-vehicle maker which had recently snapped up SsangYong Motor of South Korea.
While all this is cold business logic, there is no question that a brand like Aston Martin in its kitty gives any company a special place in the sun. And this is equally true for M&M, which has grown rapidly over the years to become a hugely formidable business group with interests spanning a host of areas — right from SUVs, cars and trucks to IT and real-estate.
In the auto business alone, the company’s success story has been astonishing since the time it launched the Scorpio a decade ago leading to the XUV500 earlier this year.
M&M also has ambitions of being a bigger global player and this is where an Aston Martin in its portfolio could have been a critical lever.
“It makes a huge difference in the world arena when you are perceived as the owner of a prestigious brand. More doors open easily and there are bigger opportunities to be had as a result,” a top auto industry official says.
To that extent, Aston Martin’s low numbers or wobbly balance sheet would have been of little relevance to M&M.
An iconic brand would have been perfect for an Indian company in a rapidly changing world where emerging nations are dictating the way forward. Acquiring top global names is now par for the course, which explains why China’s Geely took over Volvo Cars and Tata Motors acquired Jaguar Land Rover.
M&M was also in the race for JLR five years ago which, perhaps, was its first serious global foray in the auto arena. It dropped out eventually as the asking price for this buyout began increasing gradually.
The reasons for this acquisition, though, were quite different from the drive for Aston Martin. In the first place, JLR’s annual numbers are at least 50 times as much. Two, Land Rover, which accounts for a lion’s share of these volumes, would have represented the premium end in M&M’s SUV business.
Perhaps, the SsangYong buyout may not have occurred as a result but this is not about rewriting history.
What is impressive is that an Indian company (and this is true for Tata Motors too which has JLR and Daewoo Commercial Vehicles in its portfolio) has come a long way since the time it decided to embark on the Scorpio.
At that point in time, even a diehard optimist would not have given local automakers any chance of survival in the long-term considering that they were up against heavyweights from the US, Europe, Korea and Japan.
M&M’s decision to focus on its core business of SUVs paid off handsomely as the Scorpio caught the eye of the market and went on to create a new chapter.
Synergies with SsangYong
Did the Aston Martin saga reflect a new M&M which is now ready to diversify and spread its wings? Officials dismiss any such notion reiterating that SUVs will continue to be the core bread-and-butter activity and the most critical growth engine.
This will now take the next big step forward once synergies with SsangYong begin happening in the coming years and M&M gets a bigger foothold in international markets.
Around the core of the SUV business are other transport-related solutions such as cars, trucks and two-wheelers. A historic British brand would have been the icing on the cake and a key component of M&M’s brand-building process.
Who would have thought even during the turn of this century that an Indian company would actually be in the fray for Aston Martin?
For that matter, JLR being in the hands of an owner from this part of the world would have been equally inconceivable some years ago.
World dynamics has changed dramatically since 2008 when the Lehman crisis happened, followed more recently by the mess in Europe.
And while all these events have doubtless spawned opportunities for Indian players, there is no taking away the fact that they have worked really hard to reach their present positions.
Frugal engineering created products such as the Scorpio, Indica and Nano. Even if all did not succeed, global CEOs such as Carlos Ghosn knew this was the only way to succeed in a new world order where China and India would be key markets.
The decision to revive Datsun as a low-cost brand for Nissan may well have stemmed from Ghosn’s India experience with M&M for the Logan, as well as his own observations on the costing of the Nano.
Little wonder, therefore, that global investors of Peugeot recently gave the thumbs-up to news that Tata Motors was a potential ally for the beleaguered French carmaker.
It was a tribute to an Indian company and its strong brand in the global market. Peugeot shares promptly fell when the Tatas denied the news.
Is Aston Martin, therefore, better off with a PE investor when M&M could have been a better fit? Time will tell.