After successive attempts of pushing vehicles across the world over the last decade did not yield the desired result, Mahindra & Mahindra (M&M) has re-worked its exports strategy which includes setting up of local offices and assembly plants in several countries, people aware of the development said.
The overseas project will be headed by Arvind Mathew, chief of international operations at M&M, and is aimed at increasing the contribution from exports to over 20% in the next five years, from around 8% now. Part of the strategy is also to mitigate the risk of losing volumes in the domestic market as was the case in the last five years, one of the persons said. “If one market doesn’t do well, there should be other markets to compensate for volume losses,” the person added.
The company had set up a local assembly plant in South Africa 20 months ago and in Sri Lanka in August this year. Future plans include setting up of assembly units in North Africa, South East Asia, East Africa and Central America. In FY19, exports of passenger vehicles jumped by a staggering 80% while shipments of commercial vehicle rose 22%. PV exports were up more than 4.5% of the total production while CV exports made up for 8.10%.
Efforts to boost overseas shipments since 2010 did not yield the desired result as contribution remained largely in the range of 5-7%. In FY18, exports of passenger vehicle was a dismal 2.63% of the total production, while commercial vehicle shipments was at 7.8% of the output. Rather than simply exporting from India, the company has decided to join hands with local partners and station a team of people in countries like Africa, Bangladesh, Indonesia and parts of Europe.
When contacted, Mathew of Mahindra said each assembly or base will cater to several countries. For instance, demand in the African countries will be fulfilled through a base in South Africa and Indonesia will cater to the southeast Asian markets. “Our approach has changed over the last three years to be more aggressive in the local market in terms of opening local offices as well as working with local people,” Mathew told FE.
The company has opened 10 local or liaison offices in the last three-four years and more such offices are planned in countries where the company will start exporting in coming years. Mahindra did not reveal the investments required in setting up assembly plants but an estimated Rs 70-100 crore is spent in one such plants. In Sri Lanka, for instance, the plant was built at Rs 80 crore in collaboration with a local partner Ideal Motors, in a 65:35 equity ratio.
Mahindra started off with assembling compact SUV KUV100 for the local market and has plans to roll out more products over the next three years. In the April-October period, PV exports accounted for around 7% of the total production. The revised strategy will not only be limited to cars and commercial vehicles, but also tractors and three-wheelers.