Companies

M&M’s SsangYong turns the corner

Varun Aggarwal Mumbai | Updated on January 15, 2018 Published on April 11, 2017

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To launch electric SUV by 2020; may also develop hybrid vehicle

Mahindra’s acquisition of South Korean car maker SsangYong is bearing fruit after six years of nurturing as the latter turned profitable in 2016 for the first time in nine years.

SsangYong Motor Company, which Mahindra & Mahindra bought for about $450 million in 2011, posted a net profit of 58 billion South Korean Won for the calendar year 2016 with a margin of about 0.8 per cent.

“Although the profit was not enough, last year we made profit after nine years. Our current sales volumes are about 150,000 but with the launch of G4 Rexton, our target for this year will be 170,000 and 200,000 for 2018,” Choi Johng-sik, global CEO of SsangYong Motor Company, said at a select press briefing in Mumbai.

Choi said the company has set a target of selling over 2.4 lakh units by 2019 and cross turnover of 6 trillion South Korean Won with 3 per cent operating margin. G4 Rexton, showcased at the Seoul Motor show, is a big bet for SsangYong as it expects the SUV to increase sales by about one lakh units in the coming years.

Choi agrees the profit margin is still below the industry average of about 5 per cent. To improve cost synergies, SsangYong is working with its Indian parent Mahindra & Mahindra on a new D-segment joint platform, which will result into four SUVs, two for each of the companies.

Apart from this, the two companies will jointly develop a full-electric SUV by 2020 and are considering a possibility of developing a hybrid vehicle as well. In a recent interview with BusinessLine, Pawan Goenka, Managing Director of M&M and Chairman of SsangYong, said that the joint development of the platform will help the two companies together save about $70 million over a five- year period.

M&M will also help SsangYong develop its first connected car platform, which would be based on Mahindra DigiSense platform, currently used by M&M’s commercial vehicles division.

“We would develop a Korean version of DigiSense with a lot more features. Then the combination of the Indian version and the Korean version of the platform will be launched for international markets,” Choi said, adding that Tech Mahindra will build the telematics for the platform.

Reviving exports

SsangYong is also trying to revive its export market with plans to re-enter the Russian market by setting up an engine plant and assembly base in Vladivostok, an underdeveloped part of Russia. Until 2014, SsangYong was selling about 35,000 cars a year in Russia.

But declining oil prices and tensions in Ukraine has cut down the overall Russian car market size by half since then, Choi said. Add to that, the 25 per cent import duty exemption that SsangYong was enjoying so far, expired last year, making its Russian operations unviable.

However, Choi said with new engine manufacturing facility, the company is expecting incentives from the Russian government, which will make the Russian operations viable again.

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Published on April 11, 2017
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