Homegrown auto major Mahindra & Mahindra (M&M), which is set to sign an agreement to buy out Navistar Group’s stake in Mahindra Navistar Automotives Limited (MNAL) and Mahindra Navistar Engines Private Limited (MNEPL) by month end, will invest Rs 200-250 crore over the next three years to maintain and upgrade the existing range of products it has developed with its erstwhile partner.
The company is further exploring opportunities to launch a 16 tonne bus and a commercial vehicle in the intermediate segment, investments for which would be made separately.
Pawan Goenka, president (automotive division), M&M said, “The joint-venture has incurred significant losses but we are committed to support operations. We will invest Rs 200-250 crore over the next three years for maintaining and upgrading our existing products. 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, at present, does not have on offer a 16 tonne bus and a commercial vehicle in the intermediate segment (9-16 tonne). 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 Rs 250 crore set aside for portfolio maintenance, Goenka added.
M&M had declared plans to buy out its US partner’s 49% stake in the joint venture MNAL and MNEPL for Rs 175 crore in December last year. Goenka informed, “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 Rs 800 crore on new products and engines for the Indian market. The truck joint venture however has been operating at very low utilization levels as the commercial vehicle market remains hard to break into for new entrants. Between April and December in the current financial year MNAL has sold 8535 units, which is a decline of 10.21% over sales reported in the corresponding period in FY12.
The two joint ventures (assembly and engine) had reported losses of Rs 370 crore in the last financial year as compared to Rs 240 crore in FY11.
Mahindra Navistar which sold 3,500 trucks in FY-12, 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 is additionally investing $ 900 million to develop three new platforms and six engines in collaboration with Korean subsidiary Ssangyong Motor Corporation and another Rs 5000 crore for developing products indigenously till end 2014.