Mahindra & Mahindra bets on new product portfolio for Ssanyong Motor Co turnaround

As part of a turnaround strategy for the loss-making Ssangyong Motor Company (SYMC), Mahindra & Mahindra (M&M), which owns 74.65% stake in the Korean automaker, is betting on a new product portfolio to ramp up volumes and increase revenues.

“Losses mean that revenue is less than expenses. Clearly we are working on all the levers that we need to have to reduce the expenses and the main lever is volume.

As the volume goes up, you would see lower fixed cost per vehicle and that would take us to profits,” Pawan Goenka, managing director, M&M, told FE on the sidelines of the launch of XUV3OO recently.

Ssangyong Motor has been reporting losses since 2017 due to falling export volumes across Europe, Middle East and Asia. While domestic sales increased by 3% year-on-year (y-o-y) at 1,06,677 units in 2017, exports declined by 29% y-o-y to 37,008 units. Ssangyong Motors’ revenue declined by 4% in calendar year 2017 at `20,900 crore reporting an operating loss of `390 crore for the nine months of January to September 2018.

“This year we have targeted volumes of 1,63,000 units which is a growth of approximately 10% over last year’s volumes of 1,45,000 units. Focus is on a new product that we are launching this month — C3100, and Rexton Sport that we launched last year. Strong product portfolio should add volumes,” Goenka added.

Analysts at Kotak Institutional Equities, in one of its earlier report, had said that the company doubled its market share in the South Korean market to 5.8% in FY2016 versus 3% in FY2015 due to success of new models like Tivoli and Korando, but the profitability did not improve materially as no model was able to achieve scale. “SsangYong Motors’ models are cannibalising each other and popularity of the new models is extremely short,” analysts observed.

M&M had acquired a 70% stake in Ssangyong Motor for `2,100 crore in 2011 after the Korean automaker ran into financial trouble. For M&M, it was an opportunity to expand overseas through acquisitions and use Ssangyong’s technology platform.

In October 2012, Ssangyong Rexton was launched in India. However, the SUV did not turn out to be as popular as expected and consequently Mahindra rebranded Rexton with a few changes in the product and launched it as Alturas G4, marking its entry in premium utility vehicle (UV) segment. Another Ssangyong product that Mahindra has launched in India is XUV3OO — re-engineered with a new engine but platform derived from Tivoli.