Auto focus

Tata Motors and Mahindra face the heat, too

| Updated on April 09, 2020 Published on April 09, 2020

Opt for business spin-offs, freeze on investments

Two prominent Indian auto brands have had to recast business priorities as a result of Covid-19.

Tata Motors was the first to announce recently that it was planning to hive off its passenger car business. Speculation is rife that the partner could be Chery of China, with whom talks have apparently been going on for some months now.

There has been no confirmation on this news but the spinoff of the car business marks an acceptance of market realties that the company cannot stand on its own. “Over the last few years, the passenger vehicle business has implemented a strong turnaround…however, the recent outbreak of Covid-19 virus increases the challenges faced by the business,” said a press release.

Doubtless, there have been some remarkable initiatives in the form of legacy brands like the Indica and Nano followed by new generation products like Nexon, Harrier and Altroz. Despite this, Tata Motors has just not been able to make much headway in a market dominated by Maruti and Hyundai.

In the case of Mahindra & Mahindra, its board decided to cap investments in SsangYong Motor of South Korea, which it had acquired nearly a decade ago. Despite its best efforts, the company continues to struggle and it just made little sense perhaps to throw good money after bad.

However, the board has authorised the M&M management to consider a special one-time infusion of up to $32 million over the next three months to ensure some continuity in the brand’s business operations.

It now remains to be seen whether this is enough to sustain SsangYong. It does not occupy the pride of place in Korea as a brand like Hyundai. Its former owner, SAIC of China, could not keep it going and there is now only so much that Mahindra can do. Whether SaangYong will go the Daewoo way is a million dollar question but survival will not be easy in the post-Covid 19 world.

Published on April 09, 2020

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