M&M chief dwells on the challenges ahead of BS VI

Murali Gopalan | Updated on: Mar 14, 2019

Pawan Goenka, MD, speaks of the ‘tremendous work’ that is happening behind the scenes

With barely a fortnight to go before the fiscal draws to a close, Pawan Goenka will have reasons to feel pleased. There has been a spate of key product launches across segments and the mojo is positively back within his company’s ecosystem.

Yet, the Managing Director of Mahindra & Mahindra is only too aware that there are bigger challenges ahead. “Next fiscal is clearly where all hands are on BS VI,” he says. The reference is to the new set of emission norms, Bharat Stage VI, which become mandatory across the country from April 2020.

Effectively, it means that there is barely a year to go before this becomes a reality except that it is not going to be a walk in the park for any auto-maker in the country. From M&M’s point of view, elaborates Goenka, there are about 30 models that need to transit to BS VI and each of them is a “good-sized project”.

Clearly, the top focus is to manage this exercise effectively in the next 12 months. There will be no new product launches during this period since it simply does not make any sense to have something new on the table now in the last lap of BS IV. It is only after BS VI that the company will start its fresh cycle of launches.

Goenka is also aware that there is a lot of work ahead for his team, which will literally have to work 24x7. “There is tremendous work that is going on which people outside do not realise,” he says. The workforce at Mahindra Research Valley in Chennai is literally burning the midnight oil to keep pace with the deadline.

After all, this is an all-new technology arena that they are getting into and it is not as if time is on their side. After all, India has decided to leapfrog directly from BS IV to BS VI in a timeframe of just three years, something that has never been attempted elsewhere in the world.

Suppliers’ conundrum

Goenka points out that the challenge is not confined to auto-makers alone but their ancillary suppliers too who are “equally busy” since it marks an even more formidable frontier for them in terms of making a different set of components.

In the process, what they have for the existing BS IV line may have to be just abolished when the BS VI line is commissioned.

“Everybody talks about OEMs and what they are doing but people don’t realise that the effort is actually happening at suppliers’ end,” he says. This comprises the fraternity that makes exhaust systems, the engine, converters, control systems, etc.

All this is also an expensive exercise since new technology does not come cheap. Goenka admits that there is a “big unknown” in terms of how customers will react to the significant increase in price of the new BS VI products. Clearly, it is impossible for manufacturers to absorb these high costs, which will have to be passed on, not the easiest of tasks in a price sensitive market like India.

There are bigger challenges that need to be addressed. For instance, during the run up to BS VI, some of the new emission-compliant products will have to start being readied sometime in mid-January 2020. “So, it means we will be ramping up BS VI and ramping down BS IV,” says Goenka. This simply means that both both BS IV and BS VI products will be jointly manufactured for two to three months.

Estimating demand

This is not going to be a simple task by any stretch of imagination. Companies will have little idea of how many BS IV vehicles they need to make because it will be be a tall order to forecast demand till March 31, 2020. “If I overestimate demand, I will have unsold vehicles that I can do nothing with,” says Goenka. Even one unsold vehicle could translate into 2000 kg of junk “because it will have no value”.

Likewise, manufacturers cannot afford to underestimate demand because they will then be left with BS VI vehicles idling in their plants for want of the right fuel. “So, even if I have BS VI vehicles sitting in my plant, I cannot sell them,” he says.

The only way out of this tangle is to ensure that the cleaner fuel is available pan-India and just not in a handful of places. Manufacturers have requested the Centre to let them know by September 30 “that there is a 100 per cent guarantee” of fuel availability. This will help ensure that there is no last minute change that could potentially jeopardise their plans.

As Goenka explains, the transition from BS III to BS IV cost money for sure but was not as complex as the present leap to BS VI, which is a totally different technology and design. “It is not upgrading as in the case of BS III to BS IV. This is a case of throwing out BS IV and making BS VI,” he says.

The concern, therefore, lies in being able to manage the transition so that “neither do I underestimate the demand for BS IV nor do I overestimate it and be left with stocks”. Yet, in this grim backdrop, Goenka is confident thanks to the calibre of people within the Mahindra ecosystem.

Those at MRV have been working around the clock and are especially upbeat now because of the recent launches in the SUV space, with the latest being the XUV300.

Employees’ spirit

“Given that we have done three launches, I am sure that many people in MRV are deprived of sleep. That doesn’t stop them,” he says proudly.

In Goenka’s view, these employees feel a certain level of attachment on the lines of ‘It’s mine and not somebody else’s… I am not doing it for someone else. I am doing it for myself’. It is this pride that keeps them going even if it means long levels of insomnia.

“This is the feeling that I think keeps us in a situation that, in spite of all the gaps that we may have anywhere, we are able to kind of always overcome any sort of constraints or roadblocks that come up,” says Goenka.

As he puts it, this goes beyond the engineering team to the people at M&M who work with suppliers or set up and operate plants.

There is a lot that goes on behind the scenes that many in the world outside cannot truly fathom.

“It is sometimes very easy to criticise something that did not come out right but I wish people knew what kind of effort goes into it. I mean, 200-300 people working for four years… that is 1200 man-years of effort,” says Goenka. No wonder that he is betting big on his colleagues at M&M to stand up to the BS VI challenge.

Published on March 14, 2019
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