Mahindra puts veteran in charge of two wheelers

Pawan Goenka is tasked with turning around the troubled company which has managed to launch only one successful product in six years

Pawan Goenka wears many hats. He is the executive director of Mahindra & Mahindra's automotive and farm equipment division, chairman of its South-Korean acquisition, SsangYong Motor Company, and a member of the group executive board of Mahindra & Mahindra. Last month, Goenka assumed his most challenging role: president of Mahindra Two Wheelers. After six product launches and investment of more than Rs 500 crore, the business was declared "potentially sick" last year after its accumulated losses peaked to Rs 790 crore at the end of March 2013.

Mahindra & Mahindra had acquired the assets of Pune-based Kinetic Motors from the Firodia family in 2008 and renamed it Mahindra Two Wheelers. Its journey has been choppy ever since. Not only was the company slow in launching exciting products in an intensely competitive market, it also faltered on the retail front with a limited presence in most markets. In the initial years, the company failed to draw in customers because of its strategy of continuing with old Kinetic products. The Mahindra Duro, for instance, was a redone Kinetic Nova, while the Mahindra Kine was a rebadged Kinetic Kine (an automatic scooter). These products had already run their course by the time the Firodia's sold the business to Mahindra & Mahindra. As a result, by the end of 2012-13, Mahindra & Mahindra's motorcycles and scooters together accounted for a mere 0.76 per cent of the 13.79 million two-wheelers sold in the country, according to the Society of Indian Automobile Manufacturers.

The company's first breakthrough product came only in 2010 when it launched the Stallio in the entry-level segment to challenge Hero Honda's (now Hero Motocorp) Splendor, the undisputed leader in the commuter segment. While Aamir Khan was roped in to promote the bike, the company's plans soon hit a snag. It had to stall production just a few months after the launch and recall every unit sold when a technical problem was detected in the gearbox. It was a huge setback. Dealer confidence nosedived and other products in the portfolio took a beating as the Mahindra brand suffered loss of face. The company went into a shell for the next two years and its fate looked uncertain. At one point, Mahindra & Mahindra Chairman Anand Mahindra even hinted at exiting the loss-making venture. Some also questioned the company's strategy to straddle the whole gamut of automobiles: cars, utility vehicles, tractors, trucks and two-wheelers.

While the company contemplated its next move, the competition surged ahead. Hero which broke up with its Japanese partner, Honda, in 2010, focused on its USP of fuel-efficient bikes. Honda, at the same time, established first itself as the dominant player in the scooter segment and then leveraged its brand equity to become strong in motorcycles. Bajaj Auto launched a range of sub-brands to cash in on the popularity of the Pulsar which is seen as a sporty and performance-oriented bike.

For Mahindra Two Wheelers, it was time to go back to the drawing board. The company revamped its entire research and development infrastructure and focused on bringing in new talent. It got back into the game last year with the Centuro, which became an instant hit with a waiting period of up to four weeks. Backed by a high-pitched marketing campaign, the bike became the company's highest selling two-wheeler ever. It even forced the company to start a second shift at its plant at Pithampur in Madhya Pradesh. The company's two-wheeler sales climbed 93 per cent in 2013-14 to close at 202,759 units and the Centuro accounted for 73 per cent of it. Its overall market share also improved to 1.36 per cent at the close of 2013-14. More important, the success of the Centuro has given Mahindra Two Wheelers the confidence to stay put in the market.

"It really was one of the best launches in the industry last year. And that makes us feel that in spite of so many players in the field, it is possible for us to come up with a new product that stands out," Goenka says. "We have a new launch happening this year which will be in the scooter segment."

Goenka is targeting annual sales of at least a million units, including a meaningful chunk (100,000 units) from exports. For this, Goenka says, the company will need two or three high-volume products (each generating around 30,000-35,000 units a month). Over the next year, the company plans to launch a motorcycle, a scooter and a premium 300cc bike. It will add one new variant/model every quarter. The new scooter, for instance, will have two or three siblings with prices ranging between Rs 40,000 and Rs 50,000. Its plan is to start with the premium segment and then move down the value chain gradually.

The company also hopes to build on the success of the Centuro. Viren Popli, executive vice-president, Mahindra Two Wheelers, says: "In every company's portfolio there is at least one product which does exceedingly well. And then there are other products which revolve around them. The Centuro for us is that one product and we will build volumes around it". While three variants of the Centuro are on the road, a fourth will come shortly.

One of the main reasons why the Centuro has clicked is its features that are usually associated with four wheelers. Goenka says features such as follow-me-home lights, flip key, anti-theft system and distance-to-empty are features of its SUV, the XUV500. "We did not want to be a me-too product and have direct comparison with well-established players. Everything that we have launched in the Centuro is coming from four wheelers," adds Goenka.

While beefing up its product line-up, the company is also pushing for wider network coverage, especially in the hinterland. Mahindra tractors and utility vehicles have established a strong bond with rural customers and the company wants to leverage on that. At present, Mahindra Two Wheelers' network has 1,300 sales touch points. In comparison, market leader Hero's network spans 6,000 outlets and that of Honda stands at 2,800.

Having overhauled the company's strategy, Goenka's challenge now will be to drive revenue growth. Demand for two-wheelers, despite the slowdown, looks promising: the market posted growth of 7 per cent last year. Experts say there is enough room for Mahindra to rev up its two-wheeler play.

THE RACING LINK

Mahindra Racing, Mahindra & Mahindra's motorcycle racing brand, is the first Indian team to participate in the premier FIM MotoGP World Motorcycle Racing Championship. The team entered the championship in 2011 in the 125cc category. Its maiden podium finish came in 2013 at the Malaysian Grand Prix. It won the Constructors' title in the 125 GP class in 2012. While the MotoGP exposure is an exercise to give its brand an added boost, the association has not helped sales at home. This is because the company is yet to launch a performance-oriented bike.