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SsangYong readies new growth blueprint

Murali Gopalan | Updated on January 16, 2018

Driving sales: With Tivoli, volumes in Europe went up to 22,000 units, a three-fold jump from 7,000

Johng-Sik Choi

The company aims at reducing costs and increasing synergies with Mahindra

The interesting part about SsangYong Motor's pavilion at the ongoing Paris Motor Show is its location. Housed on the first floor, it shares space with the likes of Mercedes-Benz and Jaguar Land Rover while its fellow Korean counterparts like Hyundai and Kia are elsewhere in another pavilion.

What SsangYong also shares with Jaguar Land Rover (JLR) is the Indian ownership DNA. While Mahindra & Mahindra is in charge of SsangYong, it is Tata Motors that owns JLR. Both the Korean and British brands are also betting big on Europe for growth at a time when the global automotive arena is particularly volatile.

From the point of view of Johng-Sik Choi, President & CEO of SsangYong Motor, the last three years have been tough for SsangYong’s international business. He says currency fluctuations in markets like Russia were huge challenges especially with a strong Korean won that translated into high import costs. In addition, when oil prices began falling, SsangYong’s exports to Russia and Latin America suffered as their economies collapsed. “We focused on Europe and Korea with new products to make up for this setback,” says Choi.

As a result, the companies domestic market volumes went up from 65,000 units three years ago to 100,000 units last year. With its recent Tivoli, volumes in Europe also went up to 22,000 units, a three-fold jump from 7,000 units.

Today, with oil prices gradually on the ascent, the Middle East market is coming back with Iran already reporting higher sales of 5,000 units (600 units last year) this calendar. The company is hopeful that the overall tally by the year end could be nearly 9,000 units.

As Choi explains, key export markets for SsangYong are those that have Free Trade Agreements (FTAs) with Korea, it includes the European Union, US, Chile, Colombia, Peru and ASEAN. The next big launch for SsangYong is the US.

“Western Europe is our prime focus and priority. Our challenge is to grow our presence in emerging markets where there are issues on import duties and slowdown,” adds Choi. The export strategy will, therefore, see completely built units despatched to countries that have FTAs with Korea. For others like Russia, local assembly is the more pragmatic option.

“We are now exploring the option of localising our products even further. This is where the alliance with Mahindra will come in handy as it is also keen on growing its global presence,” says Choi.

Yet, there is no intent of proactive participation in India at least for now. The SsangYong chief admits that it is a market with good potential thanks to its large population. Eventually, disposable income levels matter since the company’s products will not come in cheap.

Electric vehicles (EVs) have been the core of focus among carmakers lately and the SsangYong chief is keenly following global trends. Though there are no specific programmes in place for hybrids and the like, the priority is to finalise a plan for future mobility by this year.

“Mahindra already has the Reva platform. They have the technical resources to develop an EV but we need an engineering solution for EVs or hybrid type of vehicles,” says Choi.

Yet, the challenge is to conserve resources and “just not waste money but still think carefully about the environment”. The EV drive is important not only for SsangYong in Korea but also for markets like Europe which are gearing up for stiffer emission norms.

It was barely some weeks ago when the company got into a tie-up with Tech Mahindra and LG Uplus for connected cars. “For the next couple of years, we need a connectivity programme to be successful for the next range of vehicles. This will need lots of technical resources and investments,” explains Choi.

While Tech Mahindra has the resources and expertise, SsangYong has in its kitty the vehicles to make this a good combination from the viewpoint of synergies. “We can save time and money which means this cooperation will hopefully be successful for the future,” he adds. This could work for products like Tivoli three to four years down the line.

Going forward, SsangYong is keen on reducing its investment burden with greater synergies coming in from Mahindra. The next generation of petrol engines is being developed jointly and a huge reduction in costs is expected. Ideally, the best bet is to have over 5 per cent operational profits than can be invested in future products and technology.

The writer was in Paris on an invitation from Volkswagen

Published on October 06, 2016

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