Mahindra & Mahindra (M&M), set to sign an agreement to buy out US-based Navistar Group’s stake in Mahindra Navistar Automotives Limited (MNAL) and Mahindra Navistar Engines Private Limited (MNEPL) by the month-end, will invest Rs200-250 crore over the next three years to maintain and upgrade the products it developed with its erstwhile partner. The homegrown auto major is also exploring opportunities to launch a 16-tonne bus and a commercial vehicle in the intermediate segment (nine-16 tonne), investments for which would be made separately.
Pawan Goenka, president (automotive division), said, “The joint venture has incurred significant losses, but we are committed to supporting operations. We are also looking at going beyond the current portfolio and revisiting two gaps in our product range, a decision on which will be taken over the next two to three months.” MNAL does not have a 16-tonne bus or a commercial vehicle in the intermediate segment. If a decision is taken to develop new products to plug the gap in these two categories, fresh investments would be announced over and above the Rs250 crore set aside for portfolio maintenance, Goenka added.
Last month, M&M had declared plans to buy out its US partner’s 49 per cent stake in the joint ventures for Rs175 crore. Goenka said, “Post the acquisition, the branding of MNAL products would change. The Navistar Group will continue to provide technical support for developing engines. But as far as development of commercial vehicles is concerned, we do not require any assistance and Navistar had not been providing us with any support for the last one and a half years.”
Mahindra Navistar has so far invested over Rs800 crore on new products and engines for the Indian market.
The truck joint venture, however, has been operating at very low utilisation levels, as the commercial vehicle market remains hard to break into for new entrants. Between April and December this financial year, MNAL sold 8,535 units, which is a decline of 10.2 per cent over sales in the corresponding period in FY12.
The two joint ventures (assembly and engine) had reported losses of Rs370 crore in the last financial year, compared to Rs240 crore in FY11.
Mahindra Navistar, which sold 3,500 trucks in FY12, is targeting 40,000 to 50,000 trucks in the next three to four years. Mahindra Navistar has a wide product portfolio of trucks in India, which are pitted against Tata Motors & Ashok Leyland.
M&M will also invest $900 million to develop three new platforms and six engines in collaboration with its South Korean subsidiary, Ssangyong Motor Corporation, and another Rs5,000 crore for developing products indigenously till end-2014.