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Manufacturers look to grow footprint abroad

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After international acquisitions, homegrown auto majors Mahindra & Mahindra (M&M) and are increasingly focusing on developing global products and mulling setting up assembly facilities abroad to scale up international business over the next three to five years.

While Tata Motors is exploring setting up a base for assembling commercial vehicles (CV) in the Asean region, M&M is assessing potential for assembling automobiles in Africa and Southeast Asia.

Pravin Shah, chief executive, automotive division (M&M) said, “Markets in Southeast Asia have a lot of potential for both auto and tractors segments. It is the second largest region for 4x4 SUVs sales, apart from the US. But the duty structure is heavy. We need to have a local base. We are evaluating various possibilities and the appropriate business model for expanding presence in the region. Africa is another market we are considering.”

The annual market size for utility vehicles in key Asean economies is estimated at 700,000 units, while that of tractors stand at 55,000 units annually. The Southeast Asian base is likely to offer products ranging from M&M's utility vehicles, Ssangyong SUVs and Mahindra tractors, along with products from Chinese tractor joint ventures Jiangling & Yeuda Tractors.

“Our aim is to have 20 per cent of business from international operations over the next three to five years. Currently, five per cent per of overall sales in automotive sector comes from abroad. For tractors, the contribution is about seven per cent,” Shah said. Mahindra, at present, has three tractors assembly plants in the US and two in China. It also assembles automobiles in Brazil and Egypt.

M&M exports its products to 37 countries. It is looking at entering new markets in Australia and Latin America with sports utility vehicle (SUV) XUV500 in the course of the year. It is eyeing 15 per cent market share in the tractors segment in US and China (from the current 7 and 10 per cent, respectively) over the next three years.

Tata Motors, too, which recently set up assembly operations for large commercial vehicles in Myanmar, is exploring another base for CV assembly in the Asean region.

Ravi Pisharody, president, commercial vehicles business unit, Tata Motors, said, “In 2008-09, international business accounted for five-six per cent of our overall volumes. Now it is 11-12 per cent. We are definitely looking at the Asean region for setting up assembly operations to expand our global presence.”

The company has assembly plants for commercial vehicles in South Africa, Bangla-desh, Thailand, Myanmar. Between April and December, M&M exported 21,000 vehicles (growth of 65 per cent) and 9,000 tractors (growth of 16 per cent).

Tata Motors, on the other hand, registered a growth of 16 per cent in exports of commercial vehicles at 39,221 units. P M Telang, managing director (India operations), Tata Motors, while declining to specify locational details of possible assembly bases said, “We are not happy with the proportion of our international business as it is today. We want to grow operations overseas rapidly and are looking at both exports and assembly operations for the purpose. We are in the process of finalising locations.”

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