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Mahindra mulls local assembly
Indian motor company Mahindra & Mahindra hoped to start building vehicles in SA within five years, executive director Pawan Goenka hinted on Thursday. Though there was no fixed timetable in place, he said the company believed local assembly would be practical once annual sales hit 6,000.
Mahindra SA's latest business plan sets a target of 12,000 sales a year by 2020 - triple this year's expected 4,000. Goenka said he expected the number to reach 6,000 "within two years", after which the company would look for assembly options.
One possibility would be to use a shared assembly plant, he said, such as that proposed for East London's industrial development zone (IDZ). IDZ officials have punted the plant, which would build vehicles for several brands, as an opportunity for low-volume companies to minimise investment costs.
Chinese manufacturer BAIC highlighted the cost of going it alone late last year when it announced a planned R12bn investment in a dedicated assembly plant in association with the Industrial Development Corporation.
Other motor companies build in SA not just for local demand but also for export, particularly to other African countries.
Goenka, however, said any Mahindra plant would probably initially limit itself to SA and its Southern Africa Customs Union neighbours. Low volumes would make it hard to be cost-competitive with mass-production Indian plants targeting other countries. "We would have to look at the price equation, but I don’t think we would start out exporting further afield," he said.
Goenka was in Johannesburg last week for the launch of the KUV100 sports utility vehicle. Until now, Mahindra has been known in SA primarily for low-priced bakkies. The arrival of the KUV100 was an important step in growing sales, Goenka said, as Mahindra had not competed in this growing market segment before. Marketers say they hope the vehicle’s build quality and improved features will attract new buyers.
The brand could not rely indefinitely on being cheaper than the opposition, Goenka said. "That is not sustainable in the long term." New products alone would not create growth, he said. Mahindra also had to adopt a higher marketing profile.
Although annual sales of 4,000 put Mahindra among the top 15 brands in SA, "it is not as high as we planned when we first invested in SA," he conceded. "SA has actually been pretty good to us, but the brand is not as strong as it should be. We have to fix that."
Source: Business Day
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