M&M woes: SsangYong sales sliding, too

Volumes dip due to South Korean firm's move to halt exports to Russia following a sharp plunge in ruble

Automobile manufacturer Mahindra & Mahindra is not facing a volume decline in the domestic passenger vehicle business alone. Sales volume at SsangYong, the South Korean automobile company acquired by M&M five years ago, is also on a decline.

In the first seven months of the calendar year, the South Korean sports utility vehicle (SUV) maker’s volume declined five per cent. M&M’s India passenger vehicle volumes dipped eight per cent in the April-July period of 2015-16.

SsangYong Motor Company’s volume had declined three per cent in 2014 (January-December) to 141,047 vehicles. This could be a second year of declines, though the management is hopeful of growth.

The decline is primarily due to SsangYong’s decision to halt exports to Russia early this year, following a sharp plunge in the ruble.

The weakening of the ruble aggravated during the second half of 2014 and impacted demand for imported passenger vehicles in Russia.

SsangYong’s exports to Russia slipped 41 per cent in 2014 after a record 35,000 vehicles in 2013. No vehicle was shipped to Russia this calendar year. Pawan Goenka, executive director, M&M, told analysts in early August that there were concerns over SsangYong’s export volumes.

Goenka, also chairman of the South Korean company, said there was a big hit due to Russia, where the company used to sell large volumes at its peak. Overall export volumes for SsangYong declined 40 per cent due to the Russian impact.  The positive news, however, is that volumes in the South Korean market grew 37 per cent in the first six months of the calendar year.

“We estimate that for the year, we will have about four per cent growth in volume, ending at about 146,000 units,” Goenka said. M&M spent Rs 2,100 crore in 2010 to acquire a 70 per cent stake in SsangYong. The stake was later raised to 73 per cent. However, the company’s operation has been making losses. In the first half of 2015, SsangYong posted sales revenue of $1.4 billion and a net loss of $46.4 million.

M&M is betting on the growth in SsangYong’s volumes in South Korea, driven by robust sales of the Tivoli, an SUV launched in January.

“The Tivoli has been perhaps the best launch in South Korea in recent times for anyone. Up to now, we have sold 33,000 units, mostly in South Korea. We have sold more than 5,000 a month for the past three or four months. Bookings right now are 8,000, so we are very happy with response that we have received and expect that the Tivoli will cross 50,000 for the year,” Goenka said.

The M&M-SsangYong tale

* M&M acquired a majority stake in Korea's SsangYong for Rs 2,100 crore in 2010

* SsangYong sales volume declined 3% in 2014 owing to low export demand

* Sales volume declined again by 5% in Jan-July period

* Net loss at $46.43 million for H1