Rexton powers M&M's premium drive

Ssangyong's sports utility vehicle has cashed in on the Indian parent's strong brand equity

Rexton, produced by SsangYong Motor, has climbed to the number 2 spot in the Rs 15-25-lakh sports utility vehicle (SUV) category in less than six months of its official launch in India. In the process, Rexton has raced past Ford Endeavour and Skoda Yeti.

The Korean-made Rexton is the first of several products planned by Mahindra & Mahindra, which owns a controlling stake in SsangYong, South Korea's smallest automobile player. M&M bought the automaker in late 2010 for Rs 2,100 crore. Though the Korean company has a premium sedan in its line-up, it specialises in SUVs - just like M&M.

Rexton, priced in the range Rs 18.4-20.6 lakh (ex-showroom, Mumbai) sells around 450-500 units a month. Sold in two variants, it is offered with two differently powered engines.

Other SUVs in this category include Chevrolet Captiva, Mitsubishi Pajero and Outlander, Honda CR-V, Renault Koleos, Maruti Suzuki Vitara, Nissan X-Trail and Hyundai Santa Fe. Collectively, this segment has seen a growth of 15.5 per cent during the April-February period this year, selling 22,057 units as against 19,100 units, according to data provided by Society of Indian Automobile Manufacturers (Siam). Toyota controls 66 per cent of this segment with the Fortuner.

M&M says local assembly has allowed it to price the multi-seater urban SUV significantly cheaper than its competitors. For instance, the Honda CR-V is priced at Rs 20.4 lakh, while the Ford Endeavour costs Rs 19.64 lakh (both ex-showroom, Delhi). The Rexton is made at M&M's Chakan facility near Pune from knocked-down parts imported directly from Korea.

The bigger challenge for M&M, of course, was to sell an unknown Korean brand in a crowded Indian market, specially a product that costs substantially more than any of the existing passenger vehicles sold by the company. XUV500, priced at around Rs 12 lakh, was the most expensive model from M&M.

The Mumbai-based company, however, says it did not face any marketing difficulty even though products from competitors, such as the Fiat Punto, Tata Aria, General Motors Sail U-VA have faced strong headwinds.

But M&M took the challenge, and delivered. Not only was the SsangYong Rexton made to share showroom space next to M&M's Scorpio and the flagship XUV500, sales executives were asked to be careful and avoid treating the foreign brand as a step child.

This was a bold experiment as track record shows selling two different automotive brands from the same showroom has not been successful n India, thought it has been a common practice for many years in the west.

For example, despite several years of efforts, Fiat cars failed to deliver as joint marketing initiatives with Tata Motors operating from the same showroom failed.

To avoid the Tata-Fiat like brand confusion and cannibalisation, companies such as Bajaj Auto has decided to set up a separate line of sales and service outlets for KTM and Kawasaki bikes. Renault and Nissan too have set up independent dealers in India though their products are quite similar.

But Pawan Goenka, president (automotive and farm equipment sectors) M&M and Chairman, SsangYong Motor Company says, "We sold Mahindra Renault from our showroom and did not have any problem. I think the difference is that we own the product (of SsangYong), so whatever P&L (profit & loss) happens is our P&L. it's not a third party's P&L. That makes the difference. Our sales team does not treat the SsangYong product as a step child. To them a Rexton is as much a Mahindra product as XUV500."

The reason, M&M says, is the strong brand equity of Mahindra in the Indian market. "I have not come across anyone saying that he cannot sell Rexton because it is a brand which he has not heard of. The reason is we have done the reverse of what we had done with the Scorpio. At the time of Scorpio, we pushed the brand and underplayed Mahindra. Now, we are overplaying the Mahindra brand as that is a strong endorsement for the products' reliability. We are saying in the branding - 'SsangYong Rexton by Mahindra", adds Goenka.

Though the Korean model has managed impressive volumes even in a dull market, it lags far behind Toyota Kirloskar's Fortuner. Priced at Rs 21.9-23.5 lakh (ex-showroom, Mumbai) the Fortuner comes at a substantial premium compared to the Rexton and enjoys a superior brand recall.

The Japanese company, known for its premium SUVs like Land Cruiser and Prado, sells around 1,500 units every month of the Fortuner.

Asked if the growing popularity of the Rexton is a threat for the Fortuner, Sandeep Singh, deputy managing director and COO, Toyota Kirloskar, said, "Fortuner is the proven vehicle and we are confident about sustaining volumes".

But Toyota may have reasons to worry in future, as M&M is planning further additions to the SsangYong line-up.